Larry Ellison _ Bloomberg
NEW YORK: Larry Ellison is throwing his personal fortune behind Paramount Skydance Corp’s bid for Warner Bros Discovery Inc, aiming to give his son’s company an advantage in a fiercely contested takeover battle with Netflix Inc.
Both suitors moved on Monday to strengthen the financial backing for their offers, though they stopped short of increasing their bids.
Netflix refinanced a portion of its planned US$59bil of debt as a way to ensure a lasting investment-grade rating, a key advantage it holds over the lower-rated Paramount.
However, it’s the personal guarantee of Ellison, the world’s fifth-richest person with a US$246bil fortune, that could force a rethink by Warner Bros.
The board previously urged shareholders to reject Paramount’s offer in part because the billionaire father of its chief executive officer David Ellison had backed the US$40.4bil of equity financing with a revocable trust that could, as the name implies, be withdrawn or amended at any time.
Warner Bros on Monday confirmed receipt of Paramount’s amended offer and said it will evaluate the proposal. The company isn’t modifying its position supporting the competing Netflix offer.
Paramount had been aggressively pursuing Warner Bros for several months, and Ellison was taken by surprise when the board agreed to a deal with Netflix for US$82.7bil for the streaming and studio assets.
The strength of the financing for each bid has emerged as a decisive issue in the takeover battle, which unleashed two massive debt-fuelled offers that rank among the largest in the past decade.
Paramount took its offer of US$30 a share, or US$108.4bil including debt, for the entire company directly to its shareholders.
“In an effort to address Warner Bros’s amorphous need for ‘flexibility’ in interim operations, Paramount’s revised proposed merger agreement offers further improved flexibility to Warner Bros on debt refinancing transactions, representations and interim operating covenants,” Paramount said in a statement on Monday.
Larry Ellison, 81, the chairman of Oracle Corp, agreed to provide an irrevocable personal guarantee of US$40.4bil in equity financing for the offer and any damages claims against Paramount, according to the statement.
Ellison also agreed not to revoke the family trust and will keep its assets in place while the Warner Bros transaction is pending.
The company said its publishing records confirmed that the Ellison family trust owns about 1.16 billion shares of Oracle common stock and that all material liabilities are publicly disclosed.
Paramount also offered to increase its regulatory reverse termination fee to US$5.8bil from US$5bil. Warner Bros would have to pay US$2.8bil to Netflix if it backs out of its deal and goes with another suitor, according to the terms of their agreement.
Paramount’s offer “continues to be the superior option to maximise value for Warner Bros shareholders,” David Ellison said in the statement. “Because of our commitment to investment and growth, our acquisition will be superior for all Warner Bros stakeholders.” — Bloomberg
