The Illusion of Tender Offers and the Certainty Debate
WBD board unanimously rejected Paramount Skydance''s $30 per share all-cash tender offer — recommending shareholders not tender. On the surface, a puzzling decision: $30 cash seems intuitively attractive. But the board''s judgment criterion was not "price" but "closing certainty" — will this deal actually complete? The WBD-PSKY-Netflix conflict is playing out as a battle over financial structure, financing commitment binding force, and risk management capability rather than content competition. PSKY''s financing structure problem: equity backstop from the Ellison family — WBD argues this relies on a revocable trust; asset and liability size undisclosed; structure changeable with market conditions; liability cap set. The "30 dollars is not actually guaranteed" assessment from shareholders'' perspective. Netflix merger by contrast: binding contracts with enforceable financing commitments already established. Board''s simple logic: what matters is not whether the money exists but whether it''s committed through transaction closing. Tender offer structural limitations: more non-binding structures with higher potential for condition changes, extensions, withdrawal vs. merger agreements — asymmetric risk transferred to shareholders if deal falls through. Hidden costs: termination fee and legal/advisory costs required if WBD terminates Netflix merger agreement to accept PSKY''s offer — directly reducing per-share value. The probability-weighted expected value framework: $30 × (PSKY closing probability) vs. (Netflix merger value) × (Netflix closing probability). WBD''s bet: the Netflix merger''s higher closing certainty (binding commitments, established regulatory approval path) produces higher expected value than PSKY''s higher nominal price but uncertain execution — even if Netflix merger implies lower per-share consideration at closing.
