A revised hostile bid was deemed inadequate and risky, clearing the way for Warner Bros. to continue pursuing a competing transaction backed by Netflix.
By yourNEWS Media Newsroom
Warner Bros. Discovery’s board has unanimously rejected a revised acquisition proposal from Paramount Skydance, concluding that the $108.4 billion bid would amount to a highly leveraged buyout that exposes shareholders to excessive financial and execution risk.
In a letter to shareholders released Wednesday, the board said the proposal relies on “an extraordinary amount of debt financing” that significantly increases the likelihood the transaction would fail to close. The board reaffirmed its support for an alternative agreement with Netflix valued at $82.7 billion, which would transfer control of Warner Bros.’ film and television studio and related assets.
Paramount Skydance and Netflix have been competing to acquire Warner Bros. and its extensive content portfolio, which includes franchises such as Harry Potter, Game of Thrones, Friends, and the DC Comics universe, along with classic films including Casablanca and Citizen Kane.
According to the board, Paramount’s proposal would leave the combined company with approximately $87 billion in debt, making it the largest leveraged buyout ever attempted. The board voted Tuesday to reject the $30-per-share all-cash offer and detailed its reasoning in a 67-page amended merger filing released alongside the shareholder letter.
The board wrote that the revised bid “remains inadequate particularly given the insufficient value it would provide, the lack of certainty in PSKY’s ability to complete the offer, and the risks and costs borne by WBD shareholders should PSKY fail to complete the offer.”
Paramount, which has an estimated market value of about $14 billion, proposed financing the deal with roughly $40 billion in equity personally guaranteed by Oracle co-founder Larry Ellison and $54 billion in new debt. The board said the structure would further weaken Paramount’s credit profile, already rated below investment grade by S&P Global, and strain cash flow, increasing the risk the transaction would collapse.
By contrast, Netflix’s proposal of $27.75 per share in cash and stock is backed by the streaming company’s roughly $400 billion market capitalization and investment-grade credit rating, factors the board cited as providing greater certainty of completion.
The rejection keeps Warner Bros. on track to proceed with the Netflix transaction, even after Paramount amended its offer on Dec. 22 to include Ellison’s personal guarantee and address earlier concerns. Ellison is Paramount’s controlling shareholder and the father of Paramount CEO David Ellison.
Netflix co-chief executives Ted Sarandos and Greg Peters welcomed the decision, saying the board’s action recognizes Netflix’s proposal “as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry.” Paramount did not immediately respond to a request for comment. Warner Bros. shares closed at $28.47 on Tuesday.
High Break-Up Costs
In the amended filing, the board said it met Dec. 23 to review Paramount’s revised bid and acknowledged some improvements, including the personal guarantee and a higher reverse termination fee of $5.8 billion. However, it concluded that abandoning the Netflix agreement would impose substantial additional costs.
Warner Bros. would owe Netflix a $2.8 billion termination fee, pay about $1.5 billion in fees to lenders, and incur roughly $350 million in added financing expenses. The company estimated the total cost of exiting the Netflix deal at approximately $4.7 billion, or $1.79 per share.
The board reiterated concerns raised earlier in December that Paramount would impose operating restrictions detrimental to Warner Bros.’ business, including blocking a planned spin-out of its cable television networks into a separate public company, Discovery Global. The board said Paramount offered “insufficient compensation” for the potential harm if its deal failed to close and said Paramount had “repeatedly failed to submit the best proposal” despite guidance on how to address deficiencies.
A Defining Hollywood Contest
The battle for Warner Bros. has become one of the most closely watched takeover contests in Hollywood, as studios seek scale amid intensifying streaming competition and unpredictable theatrical revenues. While Netflix’s offer carries a lower headline value, analysts have cited its simpler financing and lower execution risk.
Harris Oakmark, Warner Bros.’ fifth-largest shareholder, previously said Paramount’s revised bid was not sufficient, noting it failed to fully cover the cost of the Netflix breakup fee. Paramount has argued its proposal would face fewer regulatory hurdles, though a combined Paramount-Warner Bros. entity would rival industry leader Disney by merging two major television operators and two streaming platforms.
A key sticking point remains the valuation of Warner Bros.’ planned Discovery Global spin-off, which would include cable networks CNN, TNT Sports, and the Discovery+ streaming service. Analysts estimate those assets could be worth up to $4 per share, while Paramount has valued them closer to $1. Lawmakers from both parties have expressed concern about further media consolidation, and President Donald Trump has said he intends to weigh in on the proposed transaction.
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