Larry Ellison Risks $40.4bn Fortune to Back Son's Warner Bros Takeover in Netflix Streaming War

Oracle founder Larry Ellison has put his money where his mouth is, agreeing to personally guarantee $40.4 billion (£30.2 billion) to back his son David's hostile takeover bid for Warner Bros Discovery. The unprecedented move addresses the target company's biggest complaint about Paramount's offer and escalates what's already Hollywood's most dramatic corporate battle in years.

Paramount announced Monday it's making the guarantee 'irrevocable', meaning Larry Ellison can't back out once the deal moves forward. That's a massive commitment from the world's second-richest person, putting roughly one-sixth of his estimated $250 billion (£187 billion) net worth on the line, according to CNN.

Warner Bros Discovery shares jumped 4% on the news, whilst Paramount shares rose 3%. Netflix's stock was unchanged.

Fixing the 'Illusory' Problem

Warner Bros Discovery's board had previously rejected Paramount's $108.4 billion (£81.1 billion) all-cash bid multiple times, calling it 'inadequate' and 'illusory'. The main sticking point? The financing relied on a revocable trust controlled by Larry Ellison, which the board argued could disappear during regulatory review.

Now Ellison has agreed not to revoke the family trust or 'adversely transfer' its assets whilst a transaction is pending. Paramount will also publish records confirming the trust owns approximately 1.16 billion Oracle shares, per The Wrap.

The elder Ellison's personal guarantee covers any damage claims against Paramount if the deal falls through, giving Warner Bros Discovery shareholders the kind of certainty they demanded.

Paramount also sweetened the pot by raising its breakup fee from $5 billion (£3.7 billion) to $5.8 billion (£4.3 billion), matching Netflix's promised payment if its competing deal collapses.

Why This Matters Now

Paramount's revised offer directly challenges Netflix's $82.7 billion (£61.9 billion) deal to acquire Warner's streaming and studio assets. Whilst Netflix is offering $27.75 (£20.75) per share for those properties, Paramount is putting $30 (£22.45) per share on the table for the entire company, including the cable networks Netflix doesn't want.

David Ellison didn't mince words in his letter to Warner Bros Discovery. 'Our $30 per share, fully financed all-cash offer was on December 4th, and continues to be, the superior option to maximize value for WBD shareholders,' he wrote, describing his vision as 'doing more, not less' for Hollywood.

But Warner Bros Discovery's board is standing firm, arguing Paramount's bid relies on a '$15 billion market cap company with a credit rating at or only a notch above "junk" status' and that the proposed $9 billion (£6.7 billion) in synergies 'would make Hollywood weaker, not stronger'.

Follow the Money

The financing package reveals just how international this fight has become. Beyond the Ellison family's contribution, the bid includes $24 billion (£17.9 billion) from sovereign wealth funds in Saudi Arabia, Qatar, and Abu Dhabi, according to Fortune.

Jared Kushner's Affinity Partners had initially pledged $200 million (£150 million) but backed out. The Ellisons and RedBird Capital Partners now backstop 100% of the equity financing.

Bank of America, Citibank, and Apollo Global Management have committed $54 billion (£40.4 billion) in debt financing, with roughly $17 billion (£12.7 billion) reserved to help Warner Bros Discovery extend an existing bridge loan.

Shareholders Hold the Cards

Paramount has extended its tender offer deadline to 5 p.m. ET on 21 January, giving shareholders more time to decide. Without board approval, Paramount needs at least 90% of outstanding shares for its hostile bid to succeed.

GAMCO Investors chairman Mario Gabelli, a major Warner Bros Discovery shareholder, called on Netflix to revise its offer following Paramount's amendments. He'd previously said he was 'highly likely' to tender his clients' shares to Paramount, though he acknowledged the fight was only in the 'early innings'.

Paramount's revised offer challenges the board's claim that Netflix provides superior 'deal certainty', arguing Warner Bros Discovery hasn't disclosed critical financial analyses or how Netflix calculates the 'dollar-for-dollar adjustment' shareholders would receive based on streaming business debt levels.

'WBD shareholders should have such information so that they can assess how the actual Netflix package compares to Paramount's offer,' David Ellison's letter stated, pointing out the board refers to a 'risk adjusted' value without explaining the adjustment.

The stakes couldn't be higher. The winner will control HBO, CNN, Warner Bros Studios, DC Comics, and Discovery's vast content library. One of the biggest questions is what happens to the cable networks, which analysts value at $3 to $5 (£2.25 to £3.75) per share, but Paramount values at just $1 (£0.75).

As of 19 December, only 397,252 Warner Bros Discovery shares had been tendered to Paramount's offer. With billions at stake and shareholders now holding all the cards, Hollywood's biggest corporate drama is far from over.