Warner Bros. Discovery (WBD) has rejected a $108.4 billion hostile takeover bid from Paramount Skydance, saying the proposal lacked solid financing assurances and carried major risks for shareholders.
In a letter to shareholders filed with regulators on Wednesday, the board said Paramount repeatedly claimed its $30-per-share cash offer was fully guaranteed by the Ellison family. However, the board stated that the offer was never fully backed and that shareholders had been misled.
The board said Paramount’s financing structure relied on a revocable trust rather than a firm, unconditional commitment from the Ellison family. Because the trust’s assets and liabilities are not publicly disclosed and can change at any time, the board said it did not provide adequate security.
Warner Bros. Discovery said the Paramount offer was inferior to its existing merger agreement with Netflix, which values the company at $27.75 per share. The Netflix deal is fully binding, requires no equity financing, and includes strong debt commitments.
Chairman Samuel Di Piazza said a shareholder vote on the Netflix deal has not yet been scheduled but is expected in the spring or early summer.
Netflix Welcomes Move
Netflix welcomed the board’s decision, saying it confirms that its merger agreement is in the best interests of Warner Bros. Discovery shareholders.
Co-CEO Ted Sarandos said the board clearly reinforced the strength of Netflix’s offer. Netflix’s other co-CEO, Greg Peters, added that the company is already in discussions with U.S. and European regulators and is confident the deal will be approved.
In premarket trading, Warner Bros. Discovery shares fell 1.4%, while Netflix shares rose 1.5%. Paramount shares dropped 1.8%.
Warner Bros Questions Paramount’s Creditworthiness
Paramount has submitted six separate bids to acquire Warner Bros. Discovery, including its film studios and television networks such as CNN and TNT Sports.
Warner Bros. Discovery said Paramount’s latest proposal relied on a complex financing structure involving multiple parties. The Ellison family trust would cover only part of the equity commitment while limiting its financial exposure, raising concerns about the reliability of the funding.
The board also questioned Paramount’s financial condition, noting its smaller market capitalization and weaker credit rating compared to Netflix. Warner Bros. Discovery warned that the deal would leave Paramount with heavy debt and limited cash flow.
Debt Levels After Deal With Paramount Will Be Risky
The board said Netflix’s offer is backed by a company with a market value above $400 billion and an investment-grade balance sheet. Netflix has also committed to continuing theatrical film releases to address industry concerns.
By contrast, Warner Bros. Discovery said Paramount’s deal would result in a debt ratio of nearly seven times operating income, creating financial strain and operational limits. The board also criticized Paramount’s plan to achieve $9 billion in synergies, saying it would likely lead to job losses and weaken the entertainment industry.
The board rejected Paramount’s claims of unfair treatment, saying it held numerous meetings and discussions with Paramount executives. Despite this, the board said Paramount never submitted a proposal that was superior to Netflix’s binding merger agreement.