Warner Bros. (WBD.US) battle intensifies: Ellison guarantees additional investment, major shareholder urges Paramount (PSKY.US) to "add money"

Paramount's (PSKY.US) latest acquisition offer has still failed to impress Harris Oakmark, a prominent shareholder of Warner Bros. Discover (WBD.US). As the fifth largest shareholder of Warner Bros. Discover (owning 96 million shares as of the end of September, accounting for about 4% of the total shares), the company stated last Friday that they hope Paramount, controlled by the Ellison family, will offer more favorable conditions. Alex Fitch, portfolio manager and head of U.S. research at Harris Oakmark, bluntly stated in an email, "The adjustments in Paramount's new offer are necessary, but not nearly enough. In our view, both acquisition offers (referring to Paramount's and Netflix's offers) have their pros and cons, and there are costs involved in changing partners midway. But if Paramount truly hopes to win this acquisition battle, they must put forward a more compelling proposal." It is understood that Paramount revised its hostile takeover offer for the Hollywood legendary film company to $108.4 billion on Monday in order to strengthen its financing arrangements. Larry Ellison, co-founder of Oracle Corporation (ORCL.US), has provided a personal guarantee of $40.4 billion for this takeover offer, aiming to acquire Warner Bros. with its HBO Max streaming platform, as well as the blockbuster IPs such as "Harry Potter," "The Lord of the Rings," and "Superman." Previously, due to the fact that most of Paramount's acquisition funds came from a revocable trust fund, this arrangement raised doubts among some Warner Bros. shareholders, causing these investors to hesitate on whether to accept the offer. In this revision, Paramount increased the penalty for failure to obtain regulatory approval from $5 billion to $5.8 billion to match Netflix's terms, but did not raise its acquisition offer of $30 per share. Top-tier media assets draw competition Warner Bros. has extended the deadline for shareholders to accept or reject the acquisition offer from Paramount from the original January 8th to January 21st. The Warner Bros. board unanimously recommended shareholders to reject Paramount's previous offer last Wednesday, and instead to support Netflix's bid. The board pointed out that Paramount's financing plan failed to provide "comprehensive protection." Although Netflix's cash offer is $23.25 per share, lower than Paramount's offer, the board believes Netflix's proposal is more advantageous: on one hand, its source of funds is more reliable, and on the other hand, the proposal includes $4.5 per share of Netflix common stock, while shareholders can also benefit from the income generated by the Warner Bros. Discovery Global business after its divestiture. Yussef Gheriani, Chief Investment Officer of IHT Wealth Management in Chicago, pointed out that this acquisition battle shows that the value of Warner Bros.' high-quality assets has been highly recognized by the market. The institution currently holds 16,000 shares of Warner Bros., 6,500 shares of Netflix, and 60,000 shares of Paramount. "The opportunity to include top-tier media assets in a portfolio is rare," Gheriani said, and indicated that he might follow the board's advice on the sale, as "the board has an in-depth understanding of the company's operations, and is better able to understand the nuances behind this deal." Thomas Poehling, an investor holding 484,000 shares of Warner Bros. and 639,000 shares of Paramount, stated that if Netflix does not increase its bid, he may accept Paramount's revised offer because Paramount's proposal is more likely to pass regulatory approval. He analyzed that Ellison's personal guarantee "adds a great deal of stability to this offer, substantially reducing the uncertainty on the financial front." Gheriani and Poehling are not the only investors holding shares in both competing film companies. Vanguard Group, State Street Corporation, and BlackRock, Inc. are the three largest shareholders of Warner Bros., collectively controlling at least 22% of the shares. These three companies are also among the top ten investors in Paramount and Netflix. All three institutions declined to comment on this matter.