Paramount Says It Has “Air Tight” Financing, Promises Faster, More Certain Approval Than Netflix In Letter To WBD Shareholders

Paramount continues to take its case to Warner Bros. Discovery shareholders after launching a hostile takeover offer to pry the company away from Netflix.

“Dear Warner Bros. Discovery Shareholder,” Paramount CEO David Ellison wrote in an open letter published today, “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.”

He recapped the last few months that saw Paramount make six offers to buy WBD, the latest being for $30 in cash. All were rejected and Warner on Friday agreed to sell its studio and streaming business to Netflix. Paramount called foul, saying its offer was financially superior and less risky and took the offer to stockholders directly, over the head of WBD board and management. That meaning Paramount will buy their shares directly if they will sell. “IT IS  NOT TOO LATE TO REALIZE THE BENEFITS OF PARAMOUNT’S PROPOSAL IF  YOU CHOOSE TO ACT NOW AND TENDER YOUR SHARES,” read the letter in all caps.

“Paramount Has Air Tight Financing to Deliver on its Offer to You,” the letter said. The company will work “collaboratively with the relevant authorities” — i.e. regulators — on the review process “and deliver this transaction to you and our other stakeholders.”

It said “WBD’s transaction with Netflix, on the other hand, appears to be in for a long and bumpy ride as it navigates the global regulatory review process” given its dominance in streaming.

The arguments echo those in the hostile tender offer announcement and a flurry of SEC filings since. Paramount set a Jan. 8 deadline for WBD stockholders to tender their shares but that could be extended. There is going to be a lot of noise and a major PR offensive as Paramount seeks to convince WBD shareholders to shrug off a deal that was already approved by the board of directors and look to the Ellisons instead.

Warner has ten days to respond to the hostile offer. In a statement today, it said “the Board and the company have for months run a fair and transparent process with each of the bidders, including extensive opportunities for due diligence and negotiations. As we communicated on Monday, the Warner Bros. Discovery Board is reviewing the latest offer submitted by Paramount Skydance, which they confirm is identical to the offer they made last week. The Board’s review will be done with the very same care and focus on its duties to our shareholders by which it reviewed all bids, including the six proposals previously submitted by Paramount Skydance.”

Netflix co-CEOs said this week they fully expected the move by Paramount and are confident of closing their deal.

Financing has emerged as a key issue in Paramount’s bid. In the company’s dramatic recap of a chain of bids and rejections laid out in an SEC filing Monday — and meant to highlight what it called an unfair process — financing kept coming up. WBD was wary of the large investments by three Middle East sovereign wealth funds as well as Jared Kushner’s Affinity Partners, also backed by Middle East cash. They brought up the risk of a probe by CFIUS (the Committee On Foreign Investment in the U.S.).

After several iterations of the bid, Paramount agreed that the full $41 billion of new equity would be backstopped by the Ellison Family Trust. The Middle East investors agreed to forgo board seats or any governance roles. There’s been chatter that, perhaps, the WBD board was not convinced. Ellison called that out in his letter.

“Paramount’s offer is not subject to any financing condition,” he said.

“On December 3, WBD told us they wanted an Ellison family backstop on our equity financing. We delivered it to them less than 24 hours later. Our December 4 offer included an equity commitment from the Ellison family trust, which contains over $250 billion of assets (more than 6x the equity funding commitment) including approximately 1.16 billion Oracle shares and tens of billions of dollars in other assets. This information is publicly available; and, notably, the trust has been a counterparty in other completed public company transactions including for Twitter, which involved one of WBD’s advisors. In fact, the equity commitment papers submitted to WBD were identical in all material respects to commitments that the advisors to WBD had agreed to in other large transactions such as Twitter and Electronic Arts.

“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.”

In an unusually aggressive move around a merger agreement that does not exist, Paramount’s letter said it already filed for Hart-Scott-Rodino (HSR) approval in the United States and announced the case to the European Commission, “opening the path to pre-notification discussions.”