Paramount Wants Warner to Show Its Work

I do wonder what would happen if Paramount Skydance Corp. just did a “real,” executable tender offer for Warner Bros. Discovery Inc. Like: Last month, Paramount offered to pay $30 per share in cash for Warner, with the tender offer set to expire on Jan. 8. Paramount argued that this offered better value for Warner’s shareholders than Warner’s existing merger deal with Netflix Inc., in which Warner shareholders would get a mix of $23.25 in cash, $4.50 (or less) of Netflix stock and a share — of uncertain value — in a spun-out company that would hold Warner’s cable television assets. Warner’s board disagreed; it argued that the total value of the Netflix deal was higher than $30 and that Paramount’s $30 was uncertain, so it stuck with Netflix.

But Paramount had launched a tender offer, so in some loose sense that was for shareholders to decide. If they liked the Netflix deal, they could ignore the tender offer and wait for the Netflix deal to close. But if they liked Paramount’s deal, they could tender their shares and get Paramount’s $30. If the shareholders all did that, they’d get the cash, Paramount would get the shares, and the Netflix deal would basically be moot. Warner’s board might prefer the Netflix deal, but if the shareholders preferred the Paramount deal they could just take it.