Major Warner Bros. Discovery shareholder dismisses Paramount's revised bid as 'Not sufficient'

New Delhi: A prominent investor in Warner Bros. Discovery (WBD) has labelled Paramount Skydance's amended acquisition offer as inadequate, despite enhancements including a massive financial guarantee from billionaire Larry Ellison, intensifying the ongoing bidding war for the media giant.

Harris Associates, WBD's fifth-largest shareholder, holding approximately 4% of the company's shares (about 96 million shares as of September's end), expressed dissatisfaction with the updated proposal. 

Portfolio manager Alex Fitch, who also serves as Harris Oakmark's Director of US Research, stated, "The changes in Paramount’s new offer were necessary, but not sufficient. We see the two deals as a toss-up, and there is a cost to changing paths. If Paramount is serious about winning, they’re going to need to provide a greater incentive."

The revised bid from Paramount Skydance, valued at $108.4 billion, is a hostile takeover attempt for the entirety of Warner Bros. Discovery, offering $30 per share. 

Key amendments include Larry Ellison, co-founder of Oracle and father of Paramount owner David Ellison, personally guaranteeing $40.4 billion to address financing concerns previously tied to a revocable trust. 

Additionally, the termination fee in case of regulatory rejection was raised to $5.8 billion from $5 billion, aligning it with a competing offer. David Ellison commented, “We expect the board of directors of WBD to take the necessary steps to secure this value-enhancing transaction and preserve and strengthen an iconic Hollywood treasure for the future.”

This comes amid a fierce competition with Netflix, which has tabled an $82.7 billion bid focused on WBD's studio and streaming assets, including HBO Max and iconic franchises like Harry Potter, The Lord of the Rings, and Superman. 

Netflix's offer comprises $23.25 per share in cash, plus $4.50 in Netflix stock and proceeds from spinning off Discovery Global. WBD's board previously unanimously recommended rejecting Paramount's initial bid in favour of Netflix's, citing superior deal terms despite comparable value. 

The shareholder tender offer deadline has been extended to January 21 from January 8.

Analysts and other investors have weighed in on the developments. Ross Benes of eMarketer noted, “The updated offer from Paramount doesn’t change the fact that WBD’s executives prefer Netflix,” but acknowledged it makes Paramount's case more compelling, predicting a prolonged battle. Investor Yussef Gheriani of IHT Wealth Management plans to follow the board's guidance, while Thomas Poehling, a shareholder in both companies, indicated he might accept Paramount's offer if Netflix doesn't counter, citing improved stability from Ellison's guarantee.

Major institutional investors like Vanguard, State Street, and BlackRock, who hold stakes in all involved parties, declined to comment. The escalating bids underscore the high value placed on WBD's premium media assets in a consolidating entertainment industry.