Warner Bros. Discovery cites financial, operational, and regulatory risks in Paramount’s bid, emphasizing that Netflix’s agreement offers greater certainty and value for shareholders while preserving the stability of the studio and streaming operations.
Warner Bros. Discovery Inc. has formally rejected an amended takeover proposal from Paramount Skydance Corp., endorsing its existing agreement with Netflix Inc. The board expressed doubts over Paramount’s ability to complete what would effectively be the largest leveraged buyout in history, despite billionaire Larry Ellison offering to personally guarantee $40.4 billion in equity financing. Warner Bros. warned shareholders that Paramount’s proposal carried substantial risks compared to Netflix’s $27.75-per-share offer for the company’s studios and streaming assets.
Paramount, with a market value of roughly $14 billion, is seeking an acquisition requiring $94.65 billion in debt and equity, nearly seven times its size. Warner Bros. highlighted concerns that the financing may not hold under changing market conditions or corporate performance. The company also cited operational restrictions in Paramount’s offer that could damage business in the months leading to a potential deal.
Ongoing M&A battle in Hollywood
The decision underscores the high-stakes battle for Warner Bros., home to HBO, Batman, Harry Potter, and other major franchises. Paramount’s bid includes the cable-TV networks, whereas Netflix’s agreement plans to spin off the networks before closing. Paramount took its offer directly to shareholders on Dec. 8, giving them until Jan. 21 to tender shares. Some analysts expect Paramount to raise its bid to around $32 per share to remain competitive.
Warner Bros.’ board emphasized that switching to Paramount would cost $4.7 billion in breakup and financing fees, leaving shareholders with less net value than the Netflix deal. Investor Pentwater Capital criticized the board for not engaging Paramount but acknowledged a possible improved offer could force reconsideration.
Regulatory and strategic considerations
Both deals are awaiting regulatory approval, with Netflix already engaging antitrust authorities. Analysts note that the valuation of cable networks like TNT and CNN is central to shareholder decision-making. Warner Bros. maintains that its Netflix merger maximizes value while mitigating risks, calling it the “best interest” for shareholders amid this complex corporate showdown.
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