“Credit rating at ‘junk‘ status”: Warner attacks Paramount

The board of directors of media giant Warner Bros. Discovery is siding with Netflix in the planned sale of the company. All board members unanimously recommend that investors accept Netflix's takeover offer valued at 83 billion US dollars. The board has no kind words for Paramount in an open letter.

“WBD's merger agreement with Netflix is a binding agreement with enforceable commitments, with no need for any equity financing and robust debt commitments. The Netflix merger is fully backed by a public company with a market cap in excess of $400 billion with an investment grade balance sheet. The debt financing for the Paramount Sky (PSKY]) bid relies on an unsecure revocable trust commitment as well as the credit worthiness of a $15 billion market cap company with a credit rating at or only a notch above ‘junk‘ status from the two leading rating agencies.”

Paramount offer not binding

Warner confirms that Paramount was in the running for a takeover for several months, with a total of six offers. At its core, the issue is the lack of binding commitments from Paramount or the owning Ellison family.

“We held dozens of calls and meetings with its principals and advisors including four in-person meetings and meals between David Zaslav and David and/or Larry Ellison and provided multiple opportunities for PSKY to offer a proposal that was superior to those of the other bidders, which PSKY never did.”

The planned hostile takeover therefore largely corresponds to the takeover offer that was recently rejected internally. “The terms of the Netflix merger are superior. The PSKY offer provides inadequate value and imposes numerous, significant risks and costs on WBD,” the letter states. “PSKY has consistently misled WBD shareholders that its proposed transaction has a "full backstop" from the Ellison family. It does not, and never has.”

Nominally, Paramount is offering 108 billion US dollars for Warner, unlike Netflix, including Warner television channels such as CNN and TNT. However, nearly 41 billion US dollars of the offer are not covered and are to come from an “unknown and opaque revocable trust.”

The board criticizes that Paramount reserves the right to withdraw the offer at any time. Furthermore, the takeover cannot be completed within the set deadline due to regulatory hurdles. Regardless, according to the board, Warner would be left with several billion US dollars in penalty costs and unfunded debt.

(mma)