Warner Bros. Discovery Stock Gains Pre-Market As Paramount Skydance Amend Offer

Warner Bros. Discovery Inc. (WBD) experienced a surge in pre-market trading following Paramount Skydance Corporation's (PSKY) revised acquisition offer. The amended proposal aims to address concerns previously raised by WBD's board, potentially paving the way for a deal that could reshape the media landscape.

In pre-market trading, WBD shares climbed 3.89% to $28.85. This positive price action reflects renewed market confidence in the potential for a successful acquisition by Paramount, despite a previously rejected offer and a competing bid from Netflix.

Paramount's enhanced offer, announced this morning, includes several key revisions designed to assuage WBD's concerns. Most notably, Oracle founder and Paramount controlling shareholder Larry Ellison has provided an irrevocable personal guarantee of $40.4 billion to back the equity financing and any potential damages claims.

This addresses WBD's prior skepticism regarding the adequacy of the Ellison family trust's backing. Furthermore, Ellison committed to maintaining the stability of the Ellison family trust and ensuring transparency of its assets, including its substantial holding of approximately 1.16 billion shares of Oracle (ORCL) common stock.

Beyond financial guarantees, Paramount's revised merger agreement offers WBD increased flexibility regarding debt refinancing transactions, representations, and interim operating covenants. The regulatory reverse termination fee has also been increased from $5 billion to $5.8 billion, aligning with the pending transaction. The offer remains contingent on WBD retaining 100% ownership of its Global Networks business.

Previously, WBD's board unanimously rejected Paramount's initial $30 per share all-cash offer, citing concerns over financing. The board had recommended shareholders support a competing $27.75 per share cash-and-stock offer from Netflix, which was viewed as a more certain value proposition. The withdrawal of financial backing from Paramount's bid by Jared Kushner's Affinity Partners had further fueled uncertainty surrounding the deal.

The markets will be closely watching WBD's board as it reassesses Paramount's revised proposal. Shareholders will likely weigh the certainty of the Netflix offer against the potentially higher value of the Paramount deal, now bolstered by Ellison's personal guarantee. The outcome will depend on the board's assessment of the revised proposal and the shareholders' decisions in the coming weeks. This situation underscores the fiercely competitive nature of the media and entertainment industry's consolidation efforts, where major players compete for strategic assets to strengthen their market positions.

The pre-market gains in WBD's stock suggest that the market is giving Paramount's amended offer a second look, with the personal guarantee seemingly addressing prior concerns and potentially shifting the balance in favor of a Paramount acquisition.