Larry Ellison personally guarantees $40.4 billion in financing as Paramount battles Netflix for control of the media giant
Paramount Skydance announced Monday that billionaire Larry Ellison will personally guarantee the tens of billions of dollars backing its hostile takeover bid for Warner Bros. Discovery. The move directly addresses concerns raised by the WBD board of directors about the legitimacy of the proposed financing structure.
Larry Ellison has agreed to provide an irrevocable personal guarantee of $40.4 billion of the equity financing for the offer and any damages claims against Paramount, the company said in a news release. The Oracle co-founder also agreed not to revoke the Ellison family trust or adversely transfer its assets during a pending transaction.
The guarantee puts Larry Ellison on the hook for about one sixth of his roughly $250 billion net worth if something falls through. Paramount is also publishing records confirming the trust owns 1.16 billion Oracle shares, details the WBD board had previously called into question.
Board skepticism prompted amended offer
Last week, Warner Bros. Discovery chairman Samuel Di Piazza expressed concerns about the supposed backing of Larry Ellison, father of Paramount CEO David Ellison, in the bid. The board was not confident that one of the richest people in the world would be there at closing, expressing doubts about whether the financing was as solid as Paramount claimed.
The Warner Bros. board has rejected Paramount’s bid multiple times, opting instead for an offer from Netflix, which WBD says is more valuable. The board also said Paramount has misrepresented itself to WBD shareholders, calling the deal’s proposed financing illusory.
Gerry Cardinale, founder and managing partner of RedBird Capital Partners, said Monday the amended filing cleared confusion around the offer. RedBird is an investor in Paramount Skydance and has committed to financing the proposed acquisition.
Paramount maintains price but increases breakup fee
Paramount notably did not increase its bid on Monday, reiterating that it believes the deal is superior to Netflix’s offer. The company is offering $30 per share for Warner Bros. Discovery, wanting to buy the entirety of WBD including its portfolio of TV networks. Paramount says its offer comes with an enterprise value of $108.4 billion.
Paramount did increase its proposed reverse breakup fee to $5.8 billion from $5 billion, matching Netflix’s promised payment to shareholders if the deal falls through. The increased breakup fee provides additional protection for WBD shareholders if regulatory issues or other problems prevent the transaction from closing.
WBD earlier this month agreed to sell its studio and streaming assets to Netflix in a transaction valued at roughly $83 billion on an enterprise basis. Netflix offered $27.75 per share for Warner Bros. and HBO, but Netflix and WBD argue that plans to spin off cable assets will increase overall value beyond Paramount’s deal.
Appeal directly to shareholders
During Monday’s interview, Cardinale, like David Ellison last week, appealed directly to WBD shareholders. The shareholders own this company, not the board or CEO David Zaslav, Cardinale emphasized. The hostile nature of Paramount’s offer means owners of WBD stock could reject the board’s recommendation if they believe Paramount’s bid delivers superior value.
Paramount made three offers for WBD in the fall, which were all rejected. WBD then launched a formal sale process that brought in offers from other bidders, including Netflix. Cardinale said Paramount’s unsolicited offers likely spurred WBD to put itself up for sale.
Regulatory concerns emerge as key issue
Beyond value, regulatory approval questions have been raised by Paramount and industry observers. Cardinale argued that the Netflix deal kills competition, noting that combining streaming platforms Netflix and HBO Max would create 420 million subscribers under one roof.
Industry constituents including talent, creators and theatrical exhibitors worry about the pricing power such a combination would create. The consolidation would give Netflix unprecedented control over content production and distribution, potentially allowing the company to dictate terms to suppliers and customers.
Netflix co-CEOs Ted Sarandos and Greg Peters have said they are confident their deal would pass regulatory review. Sarandos has issued reassurances about the future of the theatrical slate for WBD under Netflix’s ownership and argued the offer would preserve jobs during a time of industry layoffs.
The offer is financed in large part by royal families of Saudi Arabia, Qatar and Abu Dhabi. WBD’s board has raised concerns about why Larry Ellison needs so much help to bankroll the deal if financing is truly strong. Shares of Warner Bros. Discovery jumped 4% Monday while Paramount gained almost 6%.