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Harris Oakmark says amended Paramount offer not sufficient

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Warner Bros board favors Netflix's ( NFLX ) more secure bid

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Bidding war speaks to the quality of Warner Bros' assets,

say

investors

By Ross Kerber and Dawn Kopecki

Dec 23 (Reuters) - Paramount Skydance's ( PSKY )

latest offer to buy Warner Bros Discovery ( WBD ) still is not

good enough for prominent shareholder Harris Oakmark, the

investor told Reuters on Friday.

Warner Bros' fifth largest shareholder, owning 96 million

shares or about 4% of shares as ‌of the end of September, said it

would hold out for more from the Ellison family-controlled

Paramount.

"The changes in Paramount's new offer were necessary,

but not sufficient," Harris Oakmark ​portfolio manager and

Director of U.S. Research Alex Fitch said in an email to

Reuters. "We see the two deals as ‍a toss-up, and there is a cost

to changing paths. If Paramount is serious about ⁠winning,

they're going to need to ⁠provide a greater incentive."

Paramount on Monday amended its $108.4 billion hostile

bid for the storied Hollywood studio to bolster its financing.

Oracle co-founder Larry Ellison, whose son ‌David owns

Paramount, is now personally guaranteeing $40.4 billion of the

bid to secure ​Warner Bros, which owns HBO Max and controls the

Harry Potter, Lord of the Rings and Superman franchises.

Questions about the financing, much of which was held in a

revocable trust, had some Warner ⁠Bros investors unsure whether

they would accept the offer. Paramount ‍also increased the ​fee it

will pay to $5.8 billion from $5 billion if regulators don't

approve the deal, to match a competing offer from Netflix ( NFLX )

, although it didn't raise its $30-a-share bid.

'TOP SHELF MEDIA ASSETS'

Warner Bros investors now have until January ‍21, extended

from January 8, to accept or reject the so-called tender offer.

The board of Warner Bros unanimously recommended on

Wednesday that shareholders reject Paramount's earlier bid in

favor of Netflix's ( NFLX ) offer, saying the financing didn't provide a

"full backstop." Even though Netflix's ( NFLX ) cash offer of $23.25 a

share is lower, the board said its bid was superior because the

financing was more secure and it includes $4.50 in shares of

Netflix ( NFLX ) common stock as well as whatever Warner Bros can get

when it spins out Discovery Global ​as part ‍of the deal.

The bidding war speaks to the quality of Warner Bros assets,

said Yussef Gheriani, chief investment officer of Chicago

investment firm IHT Wealth Management, which owns 16,000 shares

of Warner Bros, 6,500 shares of Netflix ( NFLX ) ​and 60,000 of Paramount.

"It's really rare to get an opportunity to add top shelf

media assets to your portfolio," he said, adding that he'll

likely follow the board's advice on the sale. "They know the

business inside out and have a better grasp of the nuances

associated with the deal than we do."

Investor Thomas Poehling, who owns 484,000 shares of Warner

Bros and 639,000 of Paramount, said he'll likely take the

revised offer if Netflix ( NFLX ) doesn't counter because Paramount has a

better chance of winning approval from regulators.

Ellison's guarantee "adds a lot of stability to ​that offer

and that removes a lot of the financing uncertainty," he said.

Gheriani and Poehling aren't the only investors to hold

shares in the rival movie studios. Vanguard, State Street and

BlackRock ( BLK ) are Warner Bros' three largest shareholders,

controlling at least 22% of the company between them.

All three are also among the ‍top ten investors in Paramount

and Netflix ( NFLX ). None commented for this article.