English Entertainment
WBD-Netflix vs Paramount: Hollywood’s hostile takeover gets nastier
LOS ANGELES & NEW YORK: Hell hath no fury like a suitor spurned. Paramount Skydance is pulling no punches after Warner Bros. Discovery rebuffed its $30-per-share, all-cash offer to buy the entertainment giant. In a scathing public broadside on 8 January, Paramount essentially called WBD’s board blind, deaf and possibly dim for preferring Netflix’s offer.
The gloves are well and truly off. Paramount has done the maths—repeatedly, publicly, and with exhibits—to show that Netflix’s deal is worth just $27.42 per share today, not the $30-ish originally touted. The culprit? Netflix’s share price has tumbled below its collar, and the planned spin-off of Discovery Global, WBD’s linear television business, looks increasingly like a poisoned chalice.
Discovery Global, Paramount argues with barely concealed glee, is worth precisely nothing. The company points to Versant Media, which debuted shares this week and promptly demonstrated what happens when linear television meets market reality. Using Versant’s trading multiple of 3.8 times forward EBITDA, Paramount values Discovery Global at $0.00 per share. They generously concede it might have up to 50 cents of “M&A option value”—corporate speak for “maybe someone desperate will buy it later.”
It gets worse for WBD shareholders. The Netflix deal contains a nasty catch: if WBD decides to saddle Discovery Global with less debt (you know, like a responsible parent), Netflix pays less cash. Dollar for dollar less. So if WBD opts for sensible 1.25 times leverage—matching Versant—shareholders would get roughly $10bn less in cash and Netflix stock. That’s $3.90 per share vanishing into thin air, replaced by more equity in the worthless stub.
“Our offer clearly provides WBD investors greater value and a more certain, expedited path to completion,” says Paramount chairman and chief executive David Ellison. Translation: take our cash before Netflix’s deal gets any uglier.
Paramount has bent over backwards to address WBD’s concerns, even securing an irrevocable personal guarantee from Larry Ellison (David’s father, in case you wondered where the money comes from) for the equity portion. Bank of America, Citibank and Apollo have committed $54bn in debt financing. The message is clear: the money is real, it’s green, and it’s ready.
WBD’s board, however, remains unmoved. Paramount is now urging shareholders to tender their shares directly, going over management’s head in a move that’s either brilliant or desperate. Perhaps both.
In Hollywood, everyone loves a sequel. This hostile takeover saga promises plenty more episodes. Grab your popcorn—preferably with extra butter, because this is getting messy.
English Entertainment
Warner Bros. Discovery shareholders approve Paramount deal
Investors wave through a $111 billion megamerger but deliver a stinging, if toothless, rebuke over half-a-billion-dollar goodbye packages
NEW YORK: The shareholders said yes to the deal. They said no to the cheque. At a virtual special meeting on Thursday that lasted barely ten minutes, Warner Bros. Discovery investors voted overwhelmingly to approve Paramount Skydance’s $111 billion acquisition of the company — and then turned around and voted against the lavish exit pay packages lined up for chief executive David Zaslav and his fellow outgoing executives.
Not that it will make much difference. The compensation vote is purely advisory and non-binding. The Warner Bros. Discovery board can, and almost certainly will, pay out as planned.
But the symbolism stings. It is the second consecutive year that WBD shareholders have voted against the executive compensation packages, and this time they had good reason. Zaslav’s exit deal is, by any measure, extraordinary. Under the terms filed with the Securities and Exchange Commission, he is set to receive $34.2 million in cash severance, $517.2 million in equity in the combined company, and $44,195 in continued health coverage — a total of at least $550 million. On top of that, Warner Bros. Discovery has agreed to reimburse Zaslav up to $335 million for taxes assessed by the Internal Revenue Service on his accelerated stock vesting, though the company says that figure will decline depending on when the deal closes. As of March 11, Zaslav also held $115.85 million in vested WBD stock awards — and last month sold a further $114 million worth of WBD shares.
Shareholder advisory firm ISS recommended voting against the compensation measure, citing “problematic” tax reimbursements to Zaslav and the full vesting of his stock awards.
Zaslav will be bound by a two-year non-competition covenant and a two-year non-solicitation of customers and employees after the deal closes.
His lieutenants are not walking away empty-handed either. J.B. Perrette, chief executive and president of global streaming and games, is in line for $142 million, comprising $18.2 million in cash severance and $123.9 million in equity. Bruce Campbell, chief revenue and strategy officer, will receive an estimated $121.5 million, including $18.8 million in severance and $102.7 million in equity. Chief financial officer Gunnar Wiedenfels is set for $120 million, made up of $6.6 million in cash severance and $113.1 million in equity. Gerhard Zeiler, president of international, will get $82.6 million, including $11.9 million in severance and $70.7 million in equity.
The deal itself, clinched in February after Netflix declined to raise its bid for Warner Bros., still needs regulatory clearance from the Justice Department and European authorities. Several state attorneys general are also weighing legal action to block it.
Senator Elizabeth Warren, Democrat of Massachusetts, was unsparing. “The Paramount-Warner Bros. merger isn’t a done deal,” she said after the shareholder vote. “State attorneys general across the country are stepping up to stop this antitrust disaster. We need to keep up this fight.”
If it does go through, the combined entity would be a formidable beast, bringing together Paramount Skydance’s stable — CBS, CBS News, Paramount Pictures, Paramount+, BET, MTV and Nickelodeon — with WBD’s portfolio of HBO, Max, Warner Bros. film and TV studios, DC, CNN, TBS, TNT, HGTV and Discovery+. Paramount has said it expects $6 billion in cost savings from the merger, which is Wall Street shorthand for mass layoffs on a significant scale.
The ten-minute meeting was presided over by chairman Samuel Di Piazza Jr., with Zaslav, Campbell, Wiedenfels and chief communications officer Robert Gibbs in virtual attendance. Di Piazza was bullish. “We appreciate the support and confidence our stockholders have placed in us to unlock the full value of our world-class entertainment portfolio,” he said. “With Paramount, we look forward to creating an exceptional combined company that will expand consumer choice and benefit the global creative talent community.”
Zaslav echoed the sentiment. “Over the past four years, our teams have transformed Warner Bros. Discovery and returned the company to industry leadership,” he said. “Today’s stockholder approval is another key milestone toward completing this historic transaction that will deliver exceptional value to our stockholders.”
Paramount Skydance struck a similar note. “Shareholder approval marks another important milestone towards completing our acquisition of Warner Bros. Discovery,” it said in a statement, adding that it looked forward to “closing the transaction in the coming months.”
The shareholders have spoken on the merger. On the pay, they were ignored before the vote was even counted.
