What David Ellison and Paramount did Monday morning — issuing a hostile takeover bid for Warner Bros. Discovery for $108 billion — sent shockwaves through the industry. Now that the dust has settled, analysts are working through how Paramount was able to make such a monumental all-cash offer.
The collection of funds and investors reveals a carefully orchestrated plan. It’s not just the Ellison family backing this move against Netflix for some of the most powerful brands in entertainment, but a select network of investors from around the world, including the Middle East and President Trump’s own family.
Family Funds
Earlier this year, Oracle co-founder Larry Ellison and RedBird Capital Partners backed the Skydance’s $8 billion merger with Paramount. His son, David Ellison, took over as Chairman and CEO of the new corporation, and it was his interest in acquiring Warner Bros. Discovery that set off the recent bidding war.
Paramount Skydance CEO David Ellison being interviewed – YouTube, CNBC Television
Now, RedBird Capital Partners is contributing $40.7 billion to the battle for Warner Bros. Discovery. It doesn’t seem as though they’re willing to settle for being one of the biggest companies in entertainment. They want to be the biggest player in the industry.
But a move this big requires more than the Ellison family’s resources.
Middle-Eastern Money
Paramount’s SEC filing for its bid reveals a contribution of $24 billion from three Middle-Eastern countries: Saudi Arabia, Qatar, and Abu Dhabi. The question of the region’s interest in the Warner Bros. Discovery sale has been a source of endless speculation. Now, the numbers are clear — it’s one of the region’s largest entertainment investments they’ve made so far.
Warner Bros. World Abu Dhabi – YouTube, Coaster Studios
Notably, Saudi Arabia recently took over EA Games with a $29 billion buy-in. It strongly suggests these countries see strategic value in Western entertainment companies, and that the age of global entertainment is here to stay.
However, despite foreign funds being brought into play, the deal has safeguards in place to ease regulatory pressure. The Middle-Eastern money will not allow these foreign investors board seats, voting power, or operational influence. This agreement should shield the bid from any scrutiny from the Committee on Foreign Investment in the United States.
But Saudi Arabia wasn’t the only investor in the acquisition of EA Games, and one of the other names also appears in the Paramount bid for Warner Bros. Discovery.
A Trump Family Connection
The investment firm run by President Trump’s son-in-law, Jared Kushner, Affinity Partners, made a small investment in EA Games. It appears that Affinity has also joined in with the Ellison family for the hostile takeover of Warner Bros. Discovery.
Jared Kushner in an interview – YouTube, TIME
With Kushner’s personal connection to the White House, and professional association with the Middle-Eastern investors, he may be strategically placed to help the deal go through.
In Paramount’s letter to shareholders Monday morning, it stressed that the Netflix deal exposes them to a “protracted multi-jurisdictional regulatory clearance process with an uncertain outcome.” Having Kushner’s investment firm involved may reassure shareholders of a positive outcome.
Wall Street
And finally, Wall Street is backing the bid as well. Bank of America, Citi, and Apollo Global Management have promised to provide Paramount $54 billion in loans should their offer be accepted. More than sending funds, they’re sending a message: Paramount still has a chance in this fight, and if it wins, it can make that money back.
Source Photo Credit: YouTube, New York Times Events; YouTube, Bloomberg Podcasts
It’s an optimism David Ellison likely wants to convey to Warner Bros. Discovery shareholders in as many ways as possible.
Do you think Ellison has chance of outmaneuvering Netflix in this Paramount hostile takeover of Warner Bros.? Let us know in the comments!
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