Warner Bros. on Wednesday unanimously rejected Paramount’s revised offer to acquire the production studio, saying the hostile bid is still too risky for shareholders to accept, despite the guaranteed financial backing Paramount pegged to its $108.4 billion offer in December.
Netflix and Paramount Skydance have been locked in a race to acquire Warner Bros. Discovery, which announced late last year that it had entered into an $83 billion deal with Netflix for its studios and the HBO Max streaming platform. That prompted Paramount CEO David Ellison to mount a hostile takeover bid. Paramount has since made eight offers to Warner Bros., all of which have been rejected by the board out of concern over the risk presented by debt, financial backing and large fees if the deal were to collapse.
In a letter to shareholders, the Warner Bros. Discovery board said that Paramount’s revised $30-per-share offer is still too risky because it relies on an “extraordinary amount of debt financing,” adding that the leveraged buyout threatens shareholders with “considerable value destruction.”
To try to assuage board concern about the financial backing of its offer, Oracle co-founder Larry Ellison, who is the father of Paramount CEO David Ellison, offered on Dec. 22 to back the deal with $40 billion in personal equity financing, leaving the remaining $54 billion to be financed with debt.
That did little to convince the Warner Bros. board, which said Wednesday that Paramount had “repeatedly failed to submit the best proposal” despite “clear direction from WBD on both the deficiencies and potential solutions.”
“Your Board unanimously determined that the PSKY amended offer remains inadequate, particularly given the insufficient value it would provide, the lack of certainty in PSKY’s ability to complete the offer and the risks and costs borne by WBD shareholders should PSKY fail to complete the offer,” the board said in the letter.
The board urged shareholders not to tender their shares into Paramount’s offer, instead recommending they accept Netflix’s competing offer of $23.25 per share, which it said would deliver significant growth value.
“The PSKY Offer Is Not Superior, or Even Comparable, to the Netflix Merger,” the board said, adding that the deal would maximize benefits while minimizing risks.
Under the Netflix merger, shareholders would retain stock in Discovery Global, the name for the new publicly traded company that would house Warner Bros. Discovery’s global entertainment and news platforms, which is slated for a spinoff in 2026. That, coupled with the shares of Netflix common stock the deal guarantees, presents considerable growth opportunities, the board said.
The terms of Paramount’s offer have been controversial since it launched its hostile bid. Paramount had planned to finance its offer with help from the royal families of Qatar, Saudi Arabia and Abu Dhabi, but said in filings with the Securities and Exchange Commission that the Middle Eastern financiers would give up voting rights and governance power if the deal goes through. That raised questions among lawmakers of foreign interference. Despite that, David Ellison, whose father is a close ally of the Trump administration, argued that his company could secure federal regulatory approval for the merger faster than Netflix could. The Netflix merger would need to pass regulatory scrutiny from federal antitrust bodies, but it would not saddle Warner Bros. with high breakup fees if the deal is blocked. The consolidation of major media companies has raised bipartisan concern from lawmakers. The Trump administration greenlit the Ellison family’s acquisition of Paramount Global, the parent company of CBS News, last year after the network agreed to shell out $16 million to settle a lawsuit brought by President Donald Trump over a “60 Minutes” interview with then-Vice President Kamala Harris, the Democratic presidential nominee. Trump involved himself in the competing Warner Bros. bids last year, when he said it was “imperative” that CNN be sold, arguing that its current ownership should not be in charge of the company. The president said he plans to “weigh in” on the Warner Bros. acquisition.
Sydney Carruth is a breaking news reporter for MS NOW. Recommended
