Sensing that the chance to seal a blockbuster deal was slipping away, Paramount chief David Ellison made a last-ditch personal appeal on Thursday afternoon to his Warner Bros Discovery counterpart David Zaslav.
“Daivd [sic], I appreciate you’re underwater today so I wanted to send you a quick text,” he wrote. “Know despite the noise of the last 24 hours I have nothing but respect and admiration for you and the company.
“It would be the honour of a lifetime to be your partner and to be the owner of these iconic assets. If we have the privilege to work together you will see that my father and I are the people you had dinner with.”
But by then it was too late. The WBD board met just hours later to vote unanimously on choosing Netflix’s rival bid for its streaming and studios business — treasured Hollywood assets including the Warner Bros movie studio and HBO.
WBD’s decision in the early hours of Friday morning sent shockwaves through the entertainment industry. In those final hours, Ellison turned to convening his closest partners and advisers to start working on a plan B: launching one of the most audacious hostile bids in history.
In the span of a few weeks, the fate of one of Hollywood’s most storied studios had been settled in a dramatic and unusually speedy process, as revealed in filings on Monday after Paramount launched a hostile $108bn takeover for WBD.
The filings showed that Ellison’s financing structure became a major flashpoint in the process as Paramount — his company with a market capitalisation of about $12bn — made a play for a much larger Hollywood group.
WBD repeatedly aired concerns over the non-US investors and the complexity of multiple funding sources in Paramount’s bid, according to the filings. WBD also told Paramount it was concerned Middle East money would invite national security scrutiny.
Ellison’s bid was backed by his father Larry, the co-founder of Oracle and one of the world’s richest people.
However, the Ellisons were providing only $12bn of the $41bn in equity to finance the deal, with $24bn coming from Middle East sovereign wealth funds and the remainder from US private equity fund RedBird and Affinity Partners, the investment group run by Donald Trump’s son-in-law Jared Kushner. Additionally, some $54bn in debt was committed from Bank of America, Citigroup and Apollo.
Paramount says it chased WBD for months with ever-richer bids and personal appeals, even private dinners, only to be stonewalled. Paramount’s leadership felt they were being strung along, according to people briefed on the talks.
“Paramount was being gaslighted from start to finish,” said a person close to the company. “No matter what answers Paramount provided, Warner kept finding excuses to say it wasn’t enough — until they started ghosting us.”
A WBD spokesperson said: “The board and the company have for months run a completely fair and transparent process with each of the bidders, and the bids speak for themselves.”
Paramount made six proposals over 12 weeks to the WBD board, with early meetings between the Ellisons and Zaslav at his Hollywood home — once owned by legendary Paramount chief Robert Evans — turning into frantic bidding sessions that still ended with rival Netflix securing the deal.
In the course of the negotiations, Paramount secured and then discarded money from China’s Tencent, and lined up funding from three Middle Eastern sovereign wealth funds as well as Trump’s son-in-law.
The Securities and Exchange Commission disclosures show that the bidding for WBD began at $19 a share, with Ellison, who had only just acquired Paramount through his Skydance vehicle in August, delivering the offer directly to Zaslav at his home in Beverly Hills on September 14.
This was followed up swiftly with a meeting between Larry Ellison, Zaslav and John Malone, chair emeritus of WBD and veteran dealmaker, to discuss the transaction.
Management and advisers at Paramount and WBD had spent two years in sporadic talks over a potential deal that led nowhere. But under the billionaire Ellison family, Paramount suddenly had the financial firepower — and the resolve — to pursue the deal to the end.
Early offers from Paramount were rebuffed, and the WBD board pursued separating the company into two. New offers went in at $22 a share and then $23.50, along with promising Zaslav roles as co-CEO and co-chair of the board of directors of the combined company.
But the Paramount offers prompted Zaslav to open up the process to rival bidders. Netflix saw its opening. Comcast also entered the contest. An expedited sales process was set to conclude a deal before Christmas.
A crucial sticking point for WBD was certainty. People close to the company admitted that price was not the only consideration and that its board believed Netflix’s offer carried greater assurance of closing.
On Friday, a person close to WBD told the Financial Times that “the board’s overriding priority, more than valuation, was choosing a bidder that could sign immediately, withstand regulatory scrutiny and close on the terms required”.
Amid a near-constant back and forth between the two sides and their lawyers, the Ellisons continued to press a personal approach. On November 17, David Ellison had lunch with Zaslav, pitching his vision of a media enterprise and market leader that could better compete with the streaming giants and “Big Tech”. Its offer was raised to $25.50 per share a few days later.
The next week, the Ellisons had dinner with Zaslav, and then returned with a new bid of $26.50 per share in an all-cash transaction at the start of December. By then the funding sources for the bid were also clear: an $11.8bn commitment from the Ellison family but with twice that from three sovereign wealth funds from the Gulf and a $1bn commitment from Tencent, alongside money from RedBird Capital Partners and Kushner’s Affinity Partners.
But it was not over. On December 3, Zaslav called Ellison with his concerns about Paramount’s equity financing structure. Centerview, Paramount’s adviser, was told that “cash is king” by WBD’s advisers. The board also had concerns about the involvement of Tencent.
WBD’s board was also worried about the Middle Eastern sovereign funding supporting Paramount’s bid, fearing it would face significant scrutiny from the Committee on Foreign Investment in the US, the agency that reviews potential national-security risks from foreign investment.
Paramount, however, argued there was no such issue, noting that the national funds of Saudi Arabia, Abu Dhabi and the Emirates — as well as the vehicle controlled by Kushner — had agreed to forgo any governance rights.
“Concerns raised by Warner over foreign-ownership thresholds, including the much-debated 15 per cent rule, were never treated as genuine roadblocks,” said a person briefed on the matter.
On December 4, Paramount finally pulled out all the stops on what it saw as a knockout offer for the business: a deal fully paid in cash worth $30 per share with a full backstop from the Ellison family and RedBird. Tencent was no longer involved, but the Gulf money was.
Ellison sent another text to Zaslav: “Just tried calling you about new bid we have submitted. I heard you on all your concerns and believe we have addressed them in our new proposal.”
The final proposal stated Paramount was ready to sign immediately, backed by fully committed debt and equity financing.
But instead, according to Paramount’s SEC filing, WBD’s board chose on “that pivotal December fourth to make no effort to even speak with Paramount or its representatives about anything”.
One of Paramount’s bankers, Blair Effron, a veteran dealmaker and co-founder of Centerview Partners, pleaded with his counterpart and longtime friend Roger Altman at WBD’s adviser Evercore: “Roger I appreciate you’re crazy busy. In case you can’t call back pls note 1 we wanted to offer complete certainty 2 strong cash value 3 speed to close. Pls note more importantly we did not include “best and final” in our bid. Big thanks b.”
The message intended to make it clear that Paramount would do whatever it took to rival any other bid. Later that evening in New York, the board instead met and voted for Netflix’s offer.
Now, Paramount has gone hostile, making a pitch directly to WBD shareholders. It is preparing for a bruising fight.
The deal could be settled in a shareholder vote rather than through text messages between Zaslav and Ellison.
“We’re really here to finish what we started,” Ellison said on CNBC on Monday morning. “We put the company in play.”