Alternate headline: Warner Discovery board to shareholders: Don't follow the money!
Or maybe: Half a loaf is better than the whole thing?
Faced with the prospect of losing control of CNN, WBD's board unanimously recommended to its shareholders that they reject the hostile takeover bid from Paramount and David Ellison. Supposedly, the board worries about the funding potential of both David and Larry Ellison, and instead believe that Netflix's market cap provides a more stable source of funding for a smaller deal:
Warner Bros. Discovery recommended shareholders reject Paramount’s unsolicited all-cash bid for the company Wednesday, saying it believes Netflix’s proposal for its studios and HBO Max streaming service is still superior.
Calling the Paramount offer “illusory” in a letter to shareholders, Warner again raised concerns about the credibility of the equity being offered by Paramount and questioned the structure of the Ellison family’s commitment to funding the deal. ...
In its letter, Warner said the Ellison family is using a revocable trust to fund the deal and that documents provided by Paramount about the commitment “contain gaps, loopholes and limitations that put you, our shareholders, and our company at risk.”
The Netflix merger, on the other hand, is fully backed by a public company with a market cap of more than $400 billion and with an investment-grade balance sheet, Warner said.
The news leaked last night that the board would recommend shareholders stick with the deal that the WBD board made with Ted Sarandos and Netflix. That set off an exchange of dueling allegations over the negotiations. The Ellisons claimed that WBD had not communicated any issues with them to allow for a bid structure that could be more palatable. The WBD board countered that they had communicated their concerns and that Paramount had not made changes sufficient to convince them to accept the offer.
Who's telling the truth? It probably sits somewhere in between these two positions, but the picture got complicated late yesterday when a piece of Paramount's funding structure dropped out. It turned out to be a very, um, interesting piece, if not a large one:
Jared Kushner’s private equity firm, Affinity Partners, is no longer participating in a bid to acquire Warner Bros. Discovery, a spokesman for the firm said Tuesday.
Affinity Partners emerged as a small investor in Paramount’s roughly $108 billion offer, which Warner Bros. Discovery has rejected in favor of a deal with Netflix. Paramount has now taken its offer to shareholders and is awaiting an official response from Warner Bros. Discovery.
“With two strong competitors vying to secure the future of this unique American asset, Affinity has decided no longer to pursue the opportunity,” the spokesman for Affinity said in a statement.
“The dynamics of the investment have changed significantly since we initially became involved in October,” the statement continued. “We continue to believe there is a strong strategic rationale for Paramount’s offer.” Bloomberg reported earlier that Affinity had dropped out of the bid.
Hoo boy. Jared Kushner is, of course, Donald Trump's son-in-law and father to Trump's grandchildren. Until last night, the Trump family's interest in this deal had not been headline news. However, the NYT does note that it hadn't been a secret either:
Mr. Kushner’s involvement in the deal attracted significant scrutiny in part because of Warner Bros. Discovery’s ownership of CNN. Mr. Trump has long been critical of the network, and, if Paramount succeeded in buying Warner Bros. Discovery with Affinity’s help, his son-in-law would have owned a piece of the news channel’s parent company. In addition, Mr. Trump has said he would be “involved” in any regulatory review of the deal.
Reportedly, Affinity Partners had prepared to contribute $200 million, a pittance in the overall scheme of a deal that has valuations close to or exceeding $100 billion. Their departure from the bid doesn't materially impact its finances. However, it may take the White House out of the equation for shareholders who worried whether the Netflix deal would run afoul of the FTC, especially given Trump's professed interest in making that decision. Sarandos must have breathed a little easier after Kushner's departure.
Still, though, the Paramount bid offers more money, and it's a little bit difficult to believe the Ellisons won't be able to cover the costs in a way that allows shareholders to wash their hands of WBD entirely. Netflix may have a strong balance sheet, but it's still only offering to buy parts of WBD, and mainly the parts that matter most: the studios and the HBO Max streaming service. The rest will get spun into a new company that will consist of the Discovery Channel cable brands and CNN, called Discovery Global.
Will shareholders really want to hold onto a cable-net company that has to sink or swim on its own without the reliability of the Warner Bros studio and HBO Max to backstop it? Or does it make more sense to sell their entire interest while the Ellisons are offering the cash to do it now? Stay tuned, and we'll see which side should have turned left at Albuquerque.
Editor's note: The mainstream media has transformed itself into the propaganda arm of the Left, and they work hard to intimidate advertisers and pressure Big Tech into choking off access to competing points of view. We hope we can gather as many allies as possible to keep all of these issues in the public square – and indeed to preserve the public square at all.
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