Paramount Skydance Postpones Warner Bros Hostile Bid Deadline to Mid-February

Paramount Skydance announced on Thursday a one-month extension of the deadline for its hostile tender offer to acquire Warner Bros Discovery, shifting the cutoff from January 21 to February 20. This decision provides Paramount additional time to sway shareholders that its $108.4 billion bid surpasses the competing proposal from Netflix to purchase the storied Hollywood entertainment company. Despite this extension, Paramount did not increase its current offer, which remains at $30 per share for the entirety of Warner Bros Discovery’s outstanding stock. To date, only 168.5 million shares, roughly 6.8% of Warner Bros Discovery’s total shares, have been tendered under Paramount’s original tender offer timeline, indicating limited shareholder acceptance thus far. If successful, this acquisition would grant Paramount ownership of valuable intellectual properties spanning popular franchises like "Friends" and "Batman," as well as control of the HBO Max streaming service, significantly altering the industry landscape. In direct competition, Netflix recently altered its approach by converting its approximately $82.7 billion offer into an all-cash deal. This maneuver aims to expedite deal closure, alleviate investor concerns about the prior mixed-stock-and-cash offer, and secure financial certainty. Offering $27.75 per share in cash for the combined streaming and studio assets, Netflix’s proposal has received unanimous approval from Warner Bros Discovery’s board of directors. While Paramount has aggressively pursued Warner Bros Discovery’s leadership with a campaign including legal action aimed at compelling negotiations, the Warner Bros board and market analysts have maintained that Paramount must enhance its bid to trigger meaningful discussions. The board has consistently rejected Paramount’s offers to date. In early trading following the extension announcement, Paramount’s shares rose modestly by 0.6%. Conversely, Netflix’s shares declined by 1.2%, and Warner Bros Discovery’s stock saw little movement. Warner Bros Discovery expressed confidence in receiving regulatory clearance for the Netflix acquisition, emphasizing the "tremendous and certain value" it attributes to the approved deal. The company also reiterated that Paramount’s current offer continues to be dismissed by its board. Responding to inquiries, Netflix declined to comment immediately. It is worth noting that Paramount previously increased its offer by including $40 billion in equity, partially guaranteed by Larry Ellison, the co-founder of Oracle and father of Paramount CEO David Ellison. Nevertheless, this revised offer was also dismissed by Warner Bros Discovery’s directors. The decision on which offer will prevail is anticipated to culminate in a shareholders’ vote, likely to be held by April. Warner Bros Discovery investors face a complex evaluation, notably considering Paramount’s contention that the company’s cable assets have little to no value. Following regulatory approvals from bodies such as the U.S. Securities and Exchange Commission, Paramount intends to urge shareholders to vote against the Netflix transaction, which it deems inferior. Moreover, Paramount has indicated plans to move swiftly to remove current Warner Bros board members and appoint new directors supportive of reviewing Paramount’s bid if shareholders reject the Netflix offer. According to insider sources, Paramount disputes the financial assumptions underpinning the Netflix agreement, particularly with respect to a $17 billion debt load transferred to the Discovery Global spinoff entity holding Warner Bros’ cable assets. Paramount warns that if this debt transfer does not occur as structured, shareholder gains under the Netflix deal could be significantly diminished. Conversely, Warner Bros Discovery asserts that its advisors utilized multiple valuation methodologies for Discovery Global, resulting in a wide share price range from $1.33 to $6.86 per share, depending on the scenario involving potential spinoff participation in future deals. Paramount continues to maintain that its offer is superior, emphasizing the clearer regulatory approval pathway it believes it holds. The Ellison family also points to their political connections, asserting these relationships could facilitate regulatory consent. Meanwhile, Netflix co-CEO Ted Sarandos has reported progress on regulatory approvals following the company's recent earnings call. Netflix anticipates that acquiring HBO Max will enhance its ability to provide personalized and flexible subscription options tailored to a global audience’s diverse preferences. Furthermore, Netflix views theatrical distribution as a new avenue for revenue generation. Nonetheless, some analysts caution that the merger could introduce short-term uncertainties related to integration expenses, content investment, and considerable combined debt levels. Investors evaluating Warner Bros Discovery shares face important considerations as the corporate battle unfolds. Proprietary AI analytics that review thousands of companies monthly highlight the importance of assessing fundamentals, momentum, and valuation to identify investment opportunities, underscoring the complexity of decision-making in such contested transactions.