Warner Bros Discovery’s board on Wednesday dismissed a $108.4 billion hostile takeover proposal from Paramount Global as “illusory,” accusing the rival media giant of misleading shareholders on its financing commitments and favoring a binding merger agreement with Netflix.
The rejection escalates a heated bidding war for control of Warner Bros Discovery, which includes its film and television studios, the HBO Max streaming platform, and iconic franchises such as “Harry Potter.”
In a letter to shareholders, the Warner Bros board criticized Paramount’s $30-per-share all-cash offer, stating it lacked a genuine guarantee from the Ellison family, led by Oracle co-founder Larry Ellison.
“It does not, and never has,” the board wrote regarding the purported backstop, adding that the proposal posed “numerous, significant risks” and relied on an “unknown and opaque” Lawrence J. Ellison Revocable Trust rather than a direct family commitment.
The board deemed Paramount’s bid “inferior” to Netflix’s $27.75-per-share cash-and-stock offer, which it described as a binding agreement requiring no equity financing and backed by strong debt commitments.
“Despite having been told repeatedly by WBD how important a full and unconditional financing commitment from the Ellison family was… the Ellison family has chosen not to backstop the PSKY offer,” the board stated, referring to Paramount Skydance.
“A revocable trust is no replacement for a secured commitment by a controlling shareholder,” it added.
Warner Bros also raised alarms about Paramount’s financial health, noting its $15 billion market capitalization and credit rating “a notch above ‘junk,'” which could result in a post-merger debt ratio of 6.8 times operating income “with virtually no current free cash flow.”
The board warned that Paramount’s plan for $9 billion in synergies would lead to job losses that “would make Hollywood weaker, not stronger.”
In response, Paramount CEO David Ellison defended the bid, saying: “Our proposal clearly offers WBD shareholders superior value and certainty, a clear path to close, and does not leave them with a heavily indebted sub-scale linear business.”
Paramount accused Warner Bros of hiding behind a “cloud of obfuscation” and emphasized that its all-cash offer provided more stability against “market fluctuations” compared to Netflix’s deal, which has been affected by a decline in Netflix’s share price.
Netflix co-CEO Greg Peters expressed confidence in ongoing discussions with the US Department of Justice and the European Commission regarding regulatory approval.
A spokesperson for Affinity Partners, run by Jared Kushner, confirmed the firm had withdrawn from Paramount’s bid, citing that the “dynamics of the investment have changed significantly” since October.
Warner Bros shares dipped 1.2 percent to $28.5, Netflix rose 2.5 percent, and Paramount fell 4.8 percent following the announcement.
No date has been set for a shareholder vote on the Netflix deal, though Chairman Samuel Di Piazza indicated it could occur in spring or early summer.
