Warner Bros. Discovery today urged shareholders to reject Paramount‘s hostile $108 billion takeover proposal, saying Netflix‘s previously accepted offer remains superior.
In a 3-page letter, WBD laid out its concerns about a number of aspects of Paramount’s offer. One of its primary issues is the repeated insistence by Paramount that its offer is backstopped by the Ellison family fortune. Larry Ellison, the father of Paramount CEO David Ellison, is a financial backer of the transaction and, as co-founder of tech giant Oracle, one of the Earth’s richest men. RedBird Capital, Apollo and three Middle East sovereign wealth funds are among the other investors in the deal.
“PSKY’s most recent proposal includes a $40.65 billion equity commitment, for which there is no Ellison family commitment of any kind,” the letter says, referring to Paramount by its ticker symbol. “Instead, they propose that you rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding. Despite having been told repeatedly by WBD how important a full and unconditional financing commitment from the Ellison family was – and despite their own ample resources, as well as multiple assurances by PSKY during our strategic review process that such a commitment was forthcoming – the Ellison family has chosen not to backstop the PSKY offer.”
Documents provided by Paramount related to the revocable trust, the letter added, “contain gaps,
loopholes and limitations that put you, our shareholders, and our company at risk.”
Before the battle for WBD heated up earlier this year, WBD had decided to split itself into two companies, one focused on studio and streaming operations and the other on declining cable networks. Plans call for the split to occur by the third quarter of 2026. If Netflix outdoes Paramount, Discovery Global Networks will spin off and Netflix will acquire Warner Bros.
Along with the rebuff of Paramount, which had been expected, WBD also divulged new details about its M&A quest in a separate SEC filing. That document includes an extensive chronology of the dealings between key stakeholders, revealing interest in the WBD assets, including Warner Bros., HBO and CNN, from two previously undisclosed suitors. Neither is identified beyond descriptions of them as “a private holding company and global investment firm” and “an American media company.”
The “American media company’s” founder called in October to express intertest in acquiring Discovery Global Networks and 20% of Studios and Streaming (including HBO Max) for $25 billion in cash, according to the filing. The private holding company, meanwhile, proposed combining WBD’s studios and streaming division with some of its “related businesses” after the split of WBD. That cash-and-stock deal would have seen WBD shareholders owning 48% of the merged entity.
While reports of other suitors, including Amazon and Apple, surfaced in recent months, the main horserace had publicly come down to Netflix, Paramount and Comcast. After Netflix’s offer was accepted, Comcast withdrew.
Along with the Ellison backstop worries, the WBD board also flagged a few other issues with Paramount’s current proposal. For one thing, the difference in the competing offers clearing regulatory hurdles is “not material,” at least in the view of the board.
The shareholder letter also labeled the offer “illusory” because it gives Paramount “the right to amend the offer in any respect (including amending the offer price).” With global regulatory approvals likely to require 12 to 18 months to be completed, “nothing in this structure offers WBD any deal certainty,” the letter asserts. Paramount’s offer, it concludes, “provides an untenable degree of risk and potential downside for WBD shareholders.”
“Following a careful evaluation of Paramount’s recently launched tender offer, the Board concluded that
the offer’s value is inadequate, with significant risks and costs imposed on our shareholders,” said
Samuel A. Di Piazza, Jr., Chair of the WBD Board of Directors. “This offer once again fails to address key concerns that we have consistently communicated to Paramount throughout our extensive engagement and review of their six previous proposals. We are confident that our merger with Netflix represents superior, more certain value for our shareholders and we look forward to delivering on the compelling benefits of our combination.”
Netflix Co-CEOs Greg Peters and Ted Sarandos sent their own letter to WBD shareholders Wednesday, reaffirming their belief in their $82.7 billion offer. “This was a competitive process that delivered the best outcome for consumers, creators, stockholders and the broader entertainment industry,” Sarandos said in a statement. “Netflix and Warner Bros. complement each other, and we’re excited to combine our strengths with their theatrical film division, world-class television studio, and the iconic HBO brand, which will continue to focus on prestige television. We’re also fully committed to releasing Warner Bros. films in theaters, with a traditional window, so audiences everywhere can enjoy them on the big screen.”
Warner’s response to Paramount’s offer, which was received on December 8, is merely the latest step in an incremental process. Paramount is widely expected to raise its offer and Netflix could do likewise.
Regardless of who prevails in the battle for Warner Bros., the deal will go down as one of the priciest media mergers in history and will alter the entertainment landscape. For an industry already reeling from thousands of job losses over the past year at major studios and networks – with even the once-invincible Amazon cutting jobs due to AI – there is a deeply skeptical outlook for the future Warner portfolio. These are assets, don’t forget, that will have been owned by four different companies over the past decade.