Paramount Skydance (PSKY) stock surged 4.3% yesterday after Oracle (ORCL) CEO Larry Ellison offered a personal guarantee of up to $40.4 billion to back Paramount Skydance’s bid to acquire Warner Bros. Discovery (WBD). PSKY maintained its $30 per share all-cash offer but revised its breakup fee upward to $5.8 billion, payable if the deal does not close. WBD stock rose 3.5%, while NFLX (NFLX) stock fell 1.2% on the news.
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The WBD board had cited financial instability as a key reason for favoring Netflix’s bid. With Ellison’s personal backstop now in play, WBD’s board said it would review Paramount Skydance’s proposal again. Both Netflix’s and Paramount Skydance’s approaches are substantially similar, but they are each subject to regulatory scrutiny that could affect a merger of this scale.
David Ellison vs. David Zaslav
WBD CEO David Zaslav confirmed receipt of Paramount Skydance’s amended unsolicited tender offer and said the board would review it in line with fiduciary duties, with advice from independent financial and legal experts. Paramount Skydance, led by CEO David Ellison, has offered to buy all WBD shares for $30 in cash per share. WBD previously rejected six bids from Paramount Skydance and instead agreed to negotiate with Netflix for the studio and streaming assets after a rapid auction.
Paramount Skydance launched a hostile tender offer on December 8, which WBD rejected, deeming Paramount Skydance’s bid not superior to Netflix’s. Following the revised proposal, WBD asked shareholders not to take action at this time. Shareholders have until January 21 to tender their shares under the amended offer.
In an interview with CNBC yesterday, Redbird Capital founder and managing director Gerry Cardinale, a partner with the Ellisons in Paramount Skydance, said the trust issue was a “red herring.” He added that it was hindering the offer from being vetted and taken seriously, so they removed it from consideration.
Is PSKY Stock a Buy, Hold, or Sell?
Analysts remain cautious about Paramount Skydance’s long-term outlook. On TipRanks, PSKY stock has a Moderate Sell consensus rating based on one Buy, eight Holds, and seven Sell ratings. The average Paramount Skydance price target of $14.08 implies 3.5% upside potential from current levels. Year-to-date, PSKY stock has surged 32.1%.
