Scoop: Original Paramount bid for WBD didn't exclude foreign voting rights
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The Paramount logo on a Los Angeles water tower. Photo: Mario Tama/Getty Images
Paramount had to make a key change during the process of bidding for Warner Bros Discovery — explicitly promising that its foreign partners and Jared Kushner's fund wouldn't have any voting or governance rights, according to sources familiar with the bidding process.
- It ended up losing out to Netflix anyway, leading to this week's hostile bid.
Why it matters: It's one of a few changes Paramount made, ultimately unsuccessfully, to help address concerns from WBD's board, sources said.
State of play: The Ellison family and RedBird, the private investment firm that helped back its acquisition of Skydance and now WBD, were always slated to have full governance control, but didn't make outright assurances about it until their latest bid, sources said.
- They reinforced that structure to avoid any national security concerns that could have otherwise been raised by the Committee for Foreign Investment in the U.S. (CFIUS)
- Earlier versions of Paramount's bid also didn't include the Ellison family backstopping all $40.7 billion in equity commitments, including via their Oracle stock.
- A source familiar with the matter told Axios that WBD's board was concerned about the original Paramount offer if one of its seven funding partners (aside from Redbird) backed out at close.
Of note: Paramount's first unsolicited bid began at just $19 per share — versus the $30 in play now — and included both cash and stock.
- One concern WBD's board had with a mixed cash-and-stock bid was that the value of Paramount's stock between October and November had declined. Paramount's solicited bids were cash-only.
- WBD and Paramount did not comment.
Zoom out: Paramount on Monday launched a hostile takeover, going directly to shareholders with an all-cash, $30-per-share offer.
- Paramount argues its offer is financially superior to Netflix's $83 billion bid for WBD's studio and streaming businesses because it puts a premium on WBD's cable networks, which would need to be spun out with a Netflix deal.
- It's also telling shareholders its bid is more likely to receive regulatory approval than Netflix's offer. (Recent comments made by President Trump about wanting WBD to spin out CNN as a part of a deal may help juice its argument.)
What's next: WBD's board said it will review Paramount's proposal and issue a decision within 10 business days. It's possible Paramount's proposal could spark another round of bids, forcing Netflix to up its price.
- While the board has said it believes Netflix's offer was superior to Paramount's for financial reasons, it will need to weigh whether choosing to reject Paramount's tender offer could invite shareholder lawsuits.
What to watch: Don't expect Comcast to re-enter the battle if WBD's board solicits another round of bids.
