Warner Bros. Discovery Inc (NASDAQ: WBD) has once again turned down Paramount Skydance’s (NASDAQ: PSKY) takeover attempt – its third in recent months.
But the company chairman, Samuel Di Piazza Jr., insists the rejection should not be mistaken for hostility.
Speaking this morning with CNBC, Di Piazza said the developing narrative that WBD just doesn’t like Paramount is “nothing further from the truth.”
In fact, the mass media and entertainment conglomerate remains “very open to a transaction with Paramount” as long as it puts something on the table that’s evidently superior to Netflix’s offer.
While PSKY has already started taking baby steps towards that, it isn’t quite there yet – Di Piazza added.
How Paramount has improved its offer for WBD
According to Chairman Di Piazza, Paramount has made meaningful progress in its pursuit.
He pointed to Larry Ellison’s personal guarantee of financing as a “major change in positions”, – noting this (certainty of funding) was one of the board’s demands.
Ellison’s involvement added credibility and stability to the proposal, signalling PSKY is willing to address Warner Bros. Discovery’s concerns head-on.
Moreover, Paramount has increased the proposed breakup fee to $5.8 billion, reflecting confidence in its ability to receive regulatory clearance for the WBD deal.
Still, it isn’t yet the better buyout offer for our investors than Netflix’s, Di Piazza asserted.
What WBD needs from Paramount
Beyond financing guarantees, Di Piazza made it clear that Paramount must sweeten the deal – and that too “significantly” – to overcome WBD’s existing commitments.
These include a $2.8 billion breakup fee – the penalty Warner Bros. Discovery would owe Netflix if it walked away from its agreement with the streaming giant.
“In the large majority of cases, when an overbidder comes in, they take that break fee and pay it. They’ve got to put something on the table that’s compelling and is superior.”
Simply put, Paramount doesn’t just have to match Netflix’s offer; it has to be willing to absorb the cost of breaking the contract as well, which means it has to put more money on the table.
Without that, WBD’s board sees little to no incentive in pivoting away from its current path.
Netflix may be safer, but Paramount still has a path
On “Squawk Box”, Chairman Di Piazza maintained that Netflix is the safer option from a regulatory standpoint – but he didn’t rule out Paramount’s chances either.
According to him, there’s a viable regulatory path forward for both deals, and the company’s board has explicitly told PSKY what it needs to do to improve its chances.
Other than that, “we can’t do their deal for them,” he told CNBC.
All in all, Di Piazza’s comments confirm that Warner Bros. Discovery hasn’t rejected Paramount as a buyer.
It’s just playing hard to get. PSKY – if willing to raise its bid – could still rewrite the ending.
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