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Jan 7 (Reuters) - Warner Bros Discovery said on Wednesday its board rejected a revised bid from Paramount Skydance, calling it a risky leveraged buyout that posed significant risks, and reaffirmed its support for Netflix's proposal to buy some of its assets.
In an amended securities filing accompanied by a letter to shareholders urging them to reject Paramount's $108.4 billion hostile bid, Warner Bros cited concerns about its adequacy and the likelihood of deal completion.
The board's recommendation
remained the same as its previous view on December 17, though it raised fresh concerns about Paramount's revised offer.
* Warner Bros said its board met on January 6 to reviewParamount's latest offer and unanimously reaffirmed its earlierrecommendation to reject the bid in favor of a rival $82.7billion cash-and-stock offer from Netflix. * Warner Bros highlighted how leveraged Paramount would beif it took on some $54 billion in debt to make the acquisition,assuming roughly $33 billion in existing Warner Bros debt whenthe deal is done. * In the letter to shareholders, Warner Bros said its boardnoted some improvements in Paramount's latest offer, includingchanges to the equity financing structure, a personal guaranteefrom billionaire Larry Ellison, father of Paramount CEO DavidEllison and Paramount's controlling shareholder, and a higherreverse termination fee of $5.8 billion if the deal fails toclose. * In its earlier rejection of Paramount's bid on December17, Warner Bros had called out the lack of any "Ellison familycommitment," and the backing of "an unknown and opaque" LawrenceJ. Ellison Revocable Trust, whose assets and liabilities werenot publicly disclosed and were subject to change. * The Warner Bros board continued to find shortcomings inParamount's amended bid: it had not agreed to cover the $2.8billion breakup fee owed to Netflix should Warner Bros walk awayfrom its merger deal with the streaming service, and continuedto impose restrictive covenants that would limit Warner Bros'ability to refinance debt. * Paramount "continued to submit offers that still includemany of the deficiencies we previously repeatedly identified,"the board wrote in a letter to shareholders, adding that itfound none of these defects in the Netflix merger agreement.Paramount also asserted its amended offer did not represent its“best and final” proposal, but did not improve terms or raiseits price. * The Warner Bros board has established a four‑member ad hoctransaction committee to oversee negotiations and evaluation ofpotential deals with Netflix or Paramount, while retaining finaldecision‑making authority at the full board level.(Compiled by Sayantani Ghosh in San Francisco and Dawn Chmielewski in Los Angeles; Editing by Jamie Freed)
