How Larry Ellison can get Warner to play ball

THE BILLIONAIRE ELLISON family said this week that it will try to overhaul the board of Warner Bros Discovery Inc. unless the Hollywood studio engages with their $108 billion takeover bid.

- CHRIS HUGHES

But winning support in a corporate fight won’t be easy as long as their offer contains holes.Sure, the Ellisons are leading rival suitor Netflix Inc. on price. Paramount Skydance Corp., the studio backed by tech luminary Larry Ellison and led by his son David, is dangling $30 per share for the whole of Warner. That’s attractive compared with Warner’s December deal with Netflix, where the studio and streaming arms get sold for a targeted $27.75 in cash and stock, and shareholders keep a cable-TV business whose value may not cover the shortfall versus Paramount's pitch.

But there’s a snag with Paramount. What happens if a deal is agreed which ultimately doesn’t close? Warner worries that the financing could collapse, resulting in a lot of wasted time and money. The reasoning is that a Paramount takeover would rely on such a vast debt package that it wouldn’t take much to spook lenders Bank of America Corp., Citigroup Inc. and Apollo Global Management Inc. into pulling out — assuming the small print offers an escape hatch. Gross debt, on Warner's assessment, would be around seven times the two companies’ combined profit as measured by expected earnings before interest, tax, depreciation and amortisation.