Warner's acquisition battle escalates again! Ellison personally guarantees $40.4 billion, Paramount faces off directly against Netflix

``` Oracle founder Larry Ellison is leveraging his personal wealth to guarantee his son-led Paramount Skydance Corp.'s takeover bid for Warner Bros. Discovery Inc., further escalating the fierce battle with Netflix. On Monday, both sides took actions to strengthen their respective financial backings, despite not directly raising their offers. Netflix ensured it would maintain its long-term investment-grade credit rating by refinancing part of its planned $59 billion debt. Analysts said this was a key advantage it held over Paramount, which has a lower credit rating. But what may truly force Warner Bros. to reassess the situation is the personal guarantee provided by Ellison. Ellison is the world's fifth-richest individual, with a personal fortune of about $246 billion. Paramount stated in a press release: "Larry Ellison has agreed to provide an irrevocable personal guarantee for the $40.4 billion equity financing required for this acquisition, as well as for any damages claims against Paramount." Previously, the Warner Bros. board had urged shareholders to reject Paramount's offer, partly because Ellison was backing the $40.4 billion equity financing through a revocable trust—meaning the trust could be withdrawn or amended at any time. Paramount has been aggressively pursuing Warner Bros. for months. Earlier, Ellison’s camp was caught off guard when the Warner Bros. board agreed to sell its streaming and movie production assets to Netflix for $82.7 billion. In this bidding war, the strength of financing behind each offer has become a decisive factor. This contest has triggered two huge acquisition proposals primarily driven by debt, ranking among the largest in a decade. Paramount made a direct offer to shareholders to acquire the entire company for $30 per share, with a total price of about $108.4 billion including debt. Paramount said: "To respond to Warner Bros.' rather vague demand for ‘flexibility’ in transitional operations, Paramount’s revised merger agreement proposal further increases Warner Bros.’ flexibility in areas such as debt refinancing, representation terms, and transitional operational constraints." Personal Endorsement In addition to providing the irrevocable personal guarantee, Ellison also agreed not to withdraw his family trust nor change its assets before the Warner Bros. transaction is completed. This guarantee will not replace the funding previously pledged by RedBird Capital and sovereign wealth funds, but adds an extra layer of security. Paramount said the company would disclose documents confirming that the Ellison family trust holds about 1.16 billion Oracle common shares, and that all major liabilities have been publicly disclosed. In addition, Paramount also proposed raising its reverse regulatory breakup fee from $5 billion to $5.8 billion. According to the agreement, if Warner Bros. withdraws from the deal with Netflix and chooses another bidder, it must pay Netflix $2.8 billion. On Monday afternoon in New York trading, Warner Bros. shares rose 3.4%, hitting an intraday high of $28.98. Paramount shares rose as much as 8.1%, while Netflix fell about 1%. Larry Ellison’s son, Paramount CEO David Ellison, said in a statement that Paramount’s acquisition proposal “remains the best option for maximizing Warner Bros. shareholder value.” He said: "Based on our commitment to investment and growth, this acquisition will outperform other proposals, benefit all Warner Bros.-related parties, and serve as a catalyst for more content production, greater theatrical distribution scale, and more consumer choices." Deal Outlook Media reported that some market participants believe Ellison’s personal guarantee provides key support for Paramount’s financing. Louis Navellier, chief investment officer of Navellier & Associates, told the media that Warner Bros.' reasons for opposing the acquisition are "rapidly collapsing." He said: "Rejecting a higher bid just because you’re questioning a trust, and accepting a lower offer instead, doesn’t make sense. Debt is not an issue because it is fully backed by Larry Ellison’s credit and guarantee." However, according to preliminary media analysis, this still may not be enough to convince the Warner Bros. board. The analysis said that, despite improvements to the breakup fee clause and financing structure, "the $30 per share offer is still not as good as Netflix’s proposal." The battle for Warner Bros. is one of the largest media deals in recent years. This century-old film company, which has produced classics like Casablanca and Batman, could reshape the entire entertainment industry’s landscape depending on its final ownership. David Ellison believes merging with his company would help preserve more traditional Hollywood structures and continue aspects of Warner Bros.' historic legacy. He argues that an all-cash acquisition backed by a family trust is financially superior and more likely to gain regulatory approval. A merger with Netflix would combine two of the world's largest streaming giants, with a total subscriber base of about 450 million, and give Netflix a huge content library—giving it an advantage in the competition with rivals such as Disney and Amazon. Bank Financing Paramount’s takeover offer is backed by $54 billion in financing commitments from Bank of America, Citigroup, and Apollo Global Management Inc., and it also plans to raise $41 billion in equity funds. Previous reports stated that $11.8 billion of this would come from the Ellison family, along with capital from three Middle Eastern sovereign wealth funds and RedBird Capital Partners. To access these funds, Paramount is presenting itself to the credit markets as a borrower likely to achieve investment-grade ratings, aiming for lower interest rates and underwriting fees. Currently, Paramount holds a rating just one notch below investment grade with S&P Global Ratings and only slightly above junk with Fitch Ratings. To enter the blue-chip credit league, the company would have to undergo major cost reductions and improve efficiency. More complex is that Paramount's debt structure means any increase in long-term financing rates during a takeover battle that could drag on to 2026 or beyond would be borne by the company, not the banks. Meanwhile, Netflix has arranged $59 billion in unsecured financing from Wells Fargo & Co., BNP Paribas SA, and HSBC Holdings Plc for its acquisition of parts of Warner Bros. assets. According to documents disclosed Monday, Netflix secured a $5 billion revolving credit facility, and two delayed-draw term loans of $10 billion each, to repay parts of its bridge financing. This means $34 billion will still be syndicated, and its strong investment-grade rating ensures low financing costs in the primary bond market. Risk Factors In last week’s letter to shareholders and a 94-page detailed regulatory filing, Warner Bros. repeatedly stressed the risks of Paramount’s proposal, including concerns from the board about the Ellison family’s failure to fully guarantee its equity commitment. The board said the equity was backed by "an opaque, uncertain revocable trust," and claimed Paramount’s documents "have gaps, loopholes, and restrictions that expose shareholders and the company to risk." The board also points out that Paramount’s previous claim of full Ellison family backing for its initial proposal was "not forthright." Warner Bros. stated that, if the Paramount deal goes through, the merged company’s debt would be close to seven times its EBITDA (earnings before interest, taxes, depreciation, and amortization). "Such a high level of debt means extremely high capital structure risk—even minor business changes in Paramount or Warner Bros. between signing and closing could have serious impacts." Warner Bros. said the company has repeatedly raised concerns about a lack of evidence that the Ellison family would guarantee the deal; in contrast, Netflix has addressed and resolved all of the board’s concerns one by one. David Ellison, meanwhile, criticized the bidding process as unfair and accused Warner Bros. of favoring Netflix. Paramount said it would extend its tender offer deadline to 5 p.m. New York time on January 21. As of December 19, 397,252 shares had been tendered. Warner Bros. currently has over 2.47 billion outstanding shares. Risk Warning and Disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article meet their particular circumstances. Investing accordingly is at your own risk. ```