Paramount Skydance on Monday launched a hostile takeover bid for Warner Bros. Discovery, moving directly to appeal to shareholders with an all-cash offer that it says represents better value than the $72 billion deal Netflix and WBD announced Friday.A hostile takeover occurs when a company makes an unsolicited offer to buy another company’s shares. The move tends to be explicitly against the wishes of the target company’s management.That’s exactly what Paramount is looking to do. “We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix,” Paramount CEO David Ellison said Monday in an interview with CNBC. “And we believe when they see what it currently in our offer, then that’s what they’ll vote for.”Ellison said WBD shareholders “deserve an opportunity to consider our superior all-cash offer for their shares in the entire company,” adding he believes it provides “superior value, and a more certain and quicker path to completion. We believe the WBD Board of Directors is pursuing an inferior proposal.”Ellison’s actions most recently mirror those of Elon Musk, who initially made an unsolicited $43 billion bid to acquire a majority stake in what was then known as Twitter, in 2022. Twitter’s board didn’t formally reject the offer. Rather, it adopted a defense tactic designed to make it more expensive for Musk to buy the social media company. After a lengthy battle, Musk acquired Twitter for $44 billion and took the company private, renaming it X.There are several other examples of successful hostile takeover bids, including InBev’s acquisition of Anheuser-Busch in 2008, as well as Kraft Foods’ acquisition of Cadbury in 2010. But this tactic doesn’t always work.How does a hostile takeover work?There are two main ways a company can go about securing a hostile takeover of a target company.The first is by appealing directly to shareholders in order to secure a majority stake of the target company’s shares. In doing so, the bidder offers shareholders a premium above where shares are currently trading. If shareholders sell at least 50% of the total shares in the target company, the bidder gets a majority stake, which it can use to help install new board members who would approve a merger. That’s the approach Paramount appears to be taking.The other way a company launches a proxy fight again involves appealing directly to shareholders of the target company. But instead of buying their shares, the bidder tries to persuade shareholders to vote on replacing board members who would approve of the acquisition.But a target company has a variety of ways to fight back to prevent a hostile takeover bid. One famous example is Carl Icahn’s attempt to acquire Clorox in 2011. His hostile takeover bid failed because Clorox’s board adopted an approach known as a “poison pill,” where existing shareholders are given the opportunity to buy more shares at a steep discount. If successful, the strategy reduces the bidder’s stake in the target company and makes it more expensive for the bidder to gain a majority stake.
Paramount Skydance on Monday launched a hostile takeover bid for Warner Bros. Discovery, moving directly to appeal to shareholders with an all-cash offer that it says represents better value than the $72 billion deal Netflix and WBD announced Friday.
A hostile takeover occurs when a company makes an unsolicited offer to buy another company’s shares. The move tends to be explicitly against the wishes of the target company’s management.
That’s exactly what Paramount is looking to do. “We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix,” Paramount CEO David Ellison said Monday in an interview with CNBC. “And we believe when they see what it currently in our offer, then that’s what they’ll vote for.”
Ellison said WBD shareholders “deserve an opportunity to consider our superior all-cash offer for their shares in the entire company,” adding he believes it provides “superior value, and a more certain and quicker path to completion. We believe the WBD Board of Directors is pursuing an inferior proposal.”
Ellison’s actions most recently mirror those of Elon Musk, who initially made an unsolicited $43 billion bid to acquire a majority stake in what was then known as Twitter, in 2022. Twitter’s board didn’t formally reject the offer. Rather, it adopted a defense tactic designed to make it more expensive for Musk to buy the social media company. After a lengthy battle, Musk acquired Twitter for $44 billion and took the company private, renaming it X.
There are several other examples of successful hostile takeover bids, including InBev’s acquisition of Anheuser-Busch in 2008, as well as Kraft Foods’ acquisition of Cadbury in 2010. But this tactic doesn’t always work.
How does a hostile takeover work?
There are two main ways a company can go about securing a hostile takeover of a target company.
The first is by appealing directly to shareholders in order to secure a majority stake of the target company’s shares. In doing so, the bidder offers shareholders a premium above where shares are currently trading. If shareholders sell at least 50% of the total shares in the target company, the bidder gets a majority stake, which it can use to help install new board members who would approve a merger. That’s the approach Paramount appears to be taking.
The other way a company launches a proxy fight again involves appealing directly to shareholders of the target company. But instead of buying their shares, the bidder tries to persuade shareholders to vote on replacing board members who would approve of the acquisition.
But a target company has a variety of ways to fight back to prevent a hostile takeover bid. One famous example is Carl Icahn’s attempt to acquire Clorox in 2011. His hostile takeover bid failed because Clorox’s board adopted an approach known as a “poison pill,” where existing shareholders are given the opportunity to buy more shares at a steep discount. If successful, the strategy reduces the bidder’s stake in the target company and makes it more expensive for the bidder to gain a majority stake.
