Warner Bros. Discovery’s board has once again turned down a bid from Paramount and advised shareholders to stick with Netflix’s competing offer. In a message to shareholders, Warner Bros.’ board expressed concerns about Paramount’s revised $108.4-billion US hostile bid, labeling it as a risky leveraged buyout that investors should decline. The board emphasized the high level of debt financing associated with Paramount’s offer, increasing the likelihood of complications in finalizing the deal. They reiterated their support for Netflix’s $82.7-billion bid for the film and television studio along with other assets.
Warner Bros. boasts popular entertainment franchises such as “Harry Potter,” “Game of Thrones,” “Friends,” and the DC Comics universe, as well as classic films like “Casablanca” and “Citizen Kane.” Despite Paramount’s persistent attempts to acquire Warner Bros., the latter has consistently rejected the bids, urging shareholders to back the sale of the streaming and studio business to Netflix.
Paramount recently secured an “irrevocable personal guarantee” from Larry Ellison, the father of Paramount CEO David Ellison, to support $40.4 billion in equity financing for its offer. Paramount also raised its proposed payout to shareholders to $5.8 billion if the deal faces regulatory obstacles, matching Netflix’s offer. However, Warner Bros.’ board voiced concerns over Paramount’s financing plan, which would burden the Hollywood studio with $87 billion in debt upon completion of the acquisition, marking it as the largest leveraged buyout in history.
The board submitted a 67-page revised merger filing outlining their reasons for declining Paramount’s offer, highlighting the significant costs associated with Paramount’s bid compared to Netflix’s proposal. Netflix’s Co-CEOs, Ted Sarandos and Greg Peters, welcomed Warner Bros.’ decision, emphasizing the superiority of Netflix’s proposal in delivering value to stockholders, consumers, creators, and the entertainment industry at large.
While Paramount’s bid remains active, Warner shareholders have until Jan. 21 to make their decision. The battle for Warner’s ownership becomes complex as Netflix and Paramount have differing interests: Netflix seeks to acquire Warner’s studio and streaming business only, while Paramount aims to acquire the entire company, including networks like CNN and Discovery.
Anticipated antitrust scrutiny surrounds any potential merger, with implications for the entertainment industry’s movie production, distribution channels, and news media landscape. The involvement of political factors, including U.S. President Donald Trump’s unprecedented suggestions regarding personal intervention in the deal, adds another layer of complexity to the situation.