Paramount says offer will deliver Warner Bros. shareholders ‘superior value’

Paramount Skydance (PSKY) sent a letter to the shareholders of Warner Bros. Discovery (WBD) which it says “sets out why Paramount’s $30.00 per share all-cash offer to acquire all of WBD is superior to WBD’s transaction with Netflix (NFLX).” The letter states in part: “Paramount began pursuing Warner Bros. Discovery because we, along with our partner RedBird Capital, believe we are the best stewards not only to build long-term value for the asset but also delight audiences and help cultivate a more vibrant creative community. We funded, founded and then merged Skydance with Paramount and know the sacrifices and investment it takes to capitalize and grow a media business. I am passionate and dedicated to this pursuit, committed to putting my own money in, and that is why I am writing to you today. Over the past 12 weeks, Paramount presented six proposals to the WBD Board of Directors and management to acquire all of WBD. On Monday, we launched a $30.00 per share all-cash tender offer to present our superior transaction to you directly. Our tender offer documents filed with the Securities and Exchange Commission include the complete bid package we submitted to the WBD Board of Directors on December 4… Our offer is financially superior to Netflix’s transaction, which provides WBD shareholders with lower value, less cash and significantly less certainty. On its face, Netflix is offering WBD shareholders $23.25 per share in cash, $4.50 in stock and a share in WBD’s Global Networks spin-off. In reality, however, the total value is materially lower than advertised: Netflix’s cash component is ~$18 billion lower than Paramount’s in the aggregate (about $7 per share)… Buried in an 8-K filing on Friday was a mechanism providing a dollar-for-dollar reduction in the purchase price if more debt gets allocated to Streaming & Studios because of an unspecified cap on Global Networks. While the limit is undisclosed, every $1 billion above it could represent a reduction of about $0.40 / share. Netflix’s transaction leaves WBD shareholders with 100% of the risk of the Global Networks standalone plan… To suggest that we are not ‘good for the money’ (or might commit fraud to try to escape our obligations), as certain reports have speculated, is absurd. That absurdity is underscored by the fact that WBD and its advisors never picked up the phone or typed out a responsive text or email to raise any question or concern or to seek any clarification about either the trust or our equity commitment papers… Our proposal represents a compelling opportunity for WBD shareholders. We are committed to seeing this transaction through. Since Monday, we have had the opportunity to speak with a number of WBD shareholders who have expressed confusion and disappointment at the process that WBD conducted, which appears to have prioritized a deal with Netflix over shareholder value maximization. Multiple equity research notes published over the last 48 hours have also agreed that our offer is superior and that the Global Networks spin-off does not close the gap to $30.00 in cash.”