Why Warner Bros. Discovery shareholders might opt for Paramount's offer — and why they might not

Core Viewpoint - Warner Bros. Discovery (WBD) shareholders are faced with a decision to tender their shares to Paramount for $30 in cash or to stick with the board's recommendation to sell the company's studio and streaming assets to Netflix for $27.75 per share [1][2][3]. Group 1: Shareholder Decisions - Shareholders have until January 8 to tender their shares to Paramount, although this deadline may be extended [2]. - If Paramount acquires 51% of WBD shares, it would gain control of the company despite the board's agreement to sell assets to Netflix [3]. - The decision to tender shares presents a game theory element, as shareholders may prefer a bidding war rather than focusing solely on the best buyer [4]. Group 2: Reasons to Tender - Two main reasons for shareholders to tender their shares to Paramount include the belief that Paramount's $30 offer is more valuable than Netflix's bid and the desire to instigate a bidding war [5]. - Shareholders may perceive a higher likelihood of regulatory approval for Paramount's offer compared to Netflix's, especially given the potential value of Discovery Global [6][10]. - Paramount's all-cash offer is seen as more straightforward compared to Netflix's bid, which includes equity with uncertain value [8]. Group 3: Reasons Not to Tender - Some shareholders may prefer not to tender their shares to encourage a bidding war, believing that Paramount will raise its bid if it sees limited interest [12]. - There are concerns that the Netflix proposal, which includes equity, may ultimately be more valuable if a mystery buyer emerges for Discovery Global [13]. - Ensuring WBD splits Discovery Global is viewed as a safer option in case regulatory hurdles block a Paramount-WBD merger [14][15]. Group 4: Financing and Regulatory Concerns - Paramount has made adjustments to its financing structure to address concerns, including a personal guarantee from Oracle founder Larry Ellison for $40.4 billion [16]. - The financing for Paramount's bid involves significant contributions from Middle Eastern sovereign wealth funds, raising potential regulatory scrutiny [20]. - WBD's board has expressed concerns about the source of funding for Paramount's bid, preferring more transparency regarding the Ellison family's financial commitment [18][19].