Larry Ellison’s Paramount has fired the starting gun on a blockbuster bidding war for Warner Bros after tabling a last-ditch takeover offer.
Paramount, which is controlled by the Oracle billionaire, has increased its bid for the Hollywood studio giant, according to US reports.
The improved bid represents a late effort by Paramount to derail an $83bn takeover agreed between Warner Bros and Netflix last year.
On Monday night Paramount was yet to confirm it had made a bid or at what price. The Los Angeles-headquartered company had previously offered $30 per share, valuing Warner Bros at $108.4bn (£80.3bn).
The board of Warner Bros has repeatedly rebuffed Paramount’s advances, insisting that the Netflix deal offers superior value. A shareholder vote on the deal is scheduled for March 20.
But the company, which is behind major film franchises including the Harry Potter series, had agreed to give Paramount a week to submit its best offer or walk away.
Heated bidding war
Under the terms of its takeover deal, Netflix has the right to match any improved rival offer, raising the prospect of a heated bidding war.
Netflix has agreed to pay $27.75 per share for Warner Bros’s studio business and the HBO Max streaming service. By contrast, Paramount’s offer also includes the group’s traditional cable channels, including the CNN news network.
Paramount has previously sweetened its bid by offering to pay a so-called “ticking fee” of $0.25 per share to investors every quarter should its deal fail to close by the end of the year.
It also agreed to cover the $2.8bn termination fee Warner Bros would have to pay Netflix if it abandons their agreed deal, as well as $1.5bn in fees linked to Warner Bros’ debt refinancing.
The rival suitors have been locked in an escalating war of words, with Paramount seeking to highlight the regulatory uncertainty surrounding the Netflix takeover.
The US department of justice (DOJ) has launched a review into the deal amid concerns that combining two major streaming services – Netflix and HBO Max – would hand the company too much power.
Netflix has shrugged off concerns, saying the deal would lead to lower overall streaming costs for consumers. However, it has acknowledged that the regulatory process could take up to 18 months.
Paramount, which would also face regulatory scrutiny, last week said it had cleared a key hurdle with the DOJ.
Netflix has also faced criticism from the cinema industry amid fears the streaming giant could release fewer films on the big screen. James Cameron, the director behind Avatar and Titanic, branded the deal “disastrous” in a letter earlier this month.
Netflix has insisted it is committed to theatrical releases while Ted Sarandos, co-chief executive, branded Mr Cameron’s comments “disingenuous”.
Foreign state ownership
Meanwhile, Mr Sarandos has hit out at Paramount over significant levels of Middle Eastern funding in its bid and claimed that foreign state ownership of media companies is a “bad idea”.
The Netflix chief criticised the involvement of Saudi Arabia, the United Arab Emirates and Qatar in Paramount’s bid, highlighting restrictions on free speech in the Gulf states.
Speaking to the BBC, he said: “I think it’s a bad idea typically to have several sovereign wealth funds in that Paramount deal. Again, a part of the world that is not very big on the First Amendment.”
The sovereign wealth funds of the three Gulf states are contributing $24bn to Paramount’s bid – twice the amount committed by the Ellison family. RedBird Capital, the US private equity fund that was the minority partner in a failed takeover bid for the Telegraph, is also funding the bid.
Paramount has insisted that the sovereign wealth funds will forgo any governance rights, including board seats.
But Mr Sarandos dismissed claims that the Middle Eastern states would have no influence over editorial output.
He said: “It seems very odd to me with the level of investment that we’re talking about that they’d have no influence or editorial control over media in another country.
Alongside regulatory concerns, both Netflix and Paramount must also contend with Donald Trump’s interventions in the deal.
The US president this week called on Netflix to sack Susan Rice, formerly a senior official in Barack Obama’s administration, from its board or “pay the consequences”.
Mr Sarandos played down concerns about political interference, saying: “This is a business deal, it’s not a political deal.”