Okay, hear’s a breakdown of the key arguments for and against tendering shares to Paramount, based on the provided text. This is essentially a summary of the shareholder dilemma.
The Situation:
Warner Bros. Revelation (WBD) is being courted by both Paramount (backed by Skydance) and Netflix. WBD has a plan to potentially spin off Discovery Global as a separate company if a full sale doesn’t happen. Shareholders have to decide weather to tender (offer) their shares to Paramount now, or hold onto them, hoping for a better outcome.
Arguments FOR Tendering to Paramount ($30/share, all cash):
* Premium Price: $30/share is currently higher than Netflix’s offer (which is $27.75 + $1 for Discovery Global equity).
* All Cash: Paramount’s offer is entirely in cash, providing immediate and certain value. netflix’s offer includes equity (stock) which has uncertainty due to a “collar” (meaning the final value of the stock portion is not known until the deal closes).
* Regulatory Concerns with Netflix: A combined netflix/HBO Max could face critically important regulatory hurdles due to antitrust concerns (Netflix is already the largest streamer). Paramount+ is smaller, making a merger with HBO Max less problematic from a competition standpoint.
* Potential to Drive Up Netflix’s Offer: Tendering to Paramount could pressure Netflix to increase its bid to compete, potentially benefiting all shareholders. Ellison has indicated the $30 offer isn’t final.
* Free Market Principle: As Mario Gabelli stated, a bidding war is beneficial for shareholders.
Arguments AGAINST Tendering to Paramount:
* Maximizing Upside with Netflix: Shareholders might prefer the potential value of the Netflix offer, especially the equity portion related to Discovery Global.
* Discovery Global Value: WBD has received a rejected $25 billion cash offer from “Company C” for Discovery Global. Analysts believe Discovery Global could be worth significantly more than the $1/share included in the netflix offer if spun off and sold separately.
* Spin-Off as a Safety Net: If regulators block the Paramount-WBD merger, the spin-off of Discovery Global provides a fallback plan for shareholders to realize value.
* Potential for Paramount to Increase Bid: If Paramount doesn’t get enough shares tendered, they might be forced to raise their offer to make it more attractive.
* keeping Options Open: Not tendering keeps the deal “in play” and allows for further negotiation and potential competing bids.
In essence, the decision boils down to:
* Risk Tolerance: Do shareholders want the certainty of $30/share now (Paramount), or gamble on a potentially higher, but less certain, outcome with Netflix or a spin-off of Discovery Global?
* Belief in Discovery Global’s Value: Do shareholders believe Discovery Global is worth more than $1/share if spun off?
* Regulatory Outlook: How likely do shareholders believe a Netflix/WBD merger is to be approved by regulators?
