Why Paramount Is Suing Warner Bros.

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Transcript

00:00Paramount sued Warner Brothers Discovery, disclose information to help investors make a more informed decision,

00:06essentially threatening a proxy fight, saying that they're also going to nominate directors to the board.

00:11For more, we're joined by Bloomberg Intelligence Media Analyst Geetha Raghunathan.

00:15Geetha, this seems to have kicked things into high gear.

00:19I think it's fair to say that they are threatening a proxy fight.

00:23Is that enough to bring Warner Brothers Discovery back to the negotiating table?

00:27Yeah, I'm not so sure, Dani.

00:30I think at the end of the day, the Warner Brothers Discovery Board, as well as the shareholders,

00:35are really looking for Paramount Skydance to sweeten the offer.

00:39So the $30 per share bid, I mean, the reason why Paramount is really standing by its offer

00:45is because of this whole controversy around what the stub value of the global networks business is,

00:52the TV networks business.

00:53So remember, we already have about a $28 per share offer in place from Netflix for the studio assets.

01:01The remaining part of the business, which is the TV network business,

01:04that is what is causing all of this controversy and all of this questioning,

01:08with Paramount basically arguing that it is worthless.

01:11It is worth zero.

01:13That's what they said in their letter last week,

01:15and which is why they're now suing for additional disclosure.

01:17Meanwhile, we know that Warner Brothers Board has internally kind of thought of about a $3 to $4 per share value

01:25for that TV network's business, and that's really what it's all kind of coming down to.

01:29But the last we heard, Dani, is that only about 2% of the Warner Brothers Discovery shares were actually tendered.

01:35So definitely shareholders are going to hold out, in my opinion, for a higher offer.

01:40I heard you on, I think, Business Week kind of giving us the basics, or Carol and Tim, the basics,

01:45about how much debt Paramount would have to take on, even if it doesn't raise its offer,

01:52and what it's going to actually be making in terms of free cash flow.

01:55It just doesn't seem to be feasible.

01:58It doesn't.

01:58And that has been the whole argument from the WBD board.

02:02They called this, in fact, one of the biggest leveraged buyouts in all of M&A,

02:07and basically pointing to over $50 billion in debt.

02:11I mean, this is for a company that has only about $13 to $14 billion in market cap,

02:14comparing that to Netflix, which has about $400 billion in market cap.

02:18It's a really huge difference between the companies there.

02:20Yes.

02:21And then if you kind of look at the pro forma, you know, it's going to be seven times levered.

02:25So that is just massive, man.