Warner Bros. Discovery (WBD) on Wednesday formally rejected Paramount’s $108 billion hostile tender offer, saying the proposal is inferior to its pending merger with Netflix and exposes shareholders to significant financial and regulatory risks.
The board said David Ellison’s $30-per-share bid does not provide adequate value and fails to resolve concerns raised in prior negotiations, effectively forcing Paramount to either raise its offer or appeal directly to 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 Warner Bros. Discovery board. “We are confident that our merger with Netflix represents superior, more certain value for our shareholders.”
Speaking on CNBC after the decision, Di Piazza said: “Doing a deal is great, closing a deal is better.”
Financing concerns
WBD reiterated concerns over the structure of Paramount’s financing, including reliance on a backstop from Larry Ellison’s revocable trust, which the board said lacks transparency and certainty. The company also flagged risks tied to sovereign fund participation, including commitments from Saudi Arabia’s Public Investment Fund, Abu Dhabi, and Qatar Investment Authority.
The rejection comes as Warner Bros. Discovery is already facing regulatory and antitrust scrutiny tied to its planned merger with Netflix, which has drawn concern from industry groups and lawmakers.
“He guaranteed it through an irrevocable trust at the last minute, and frankly, that wasn’t as good as an investment grade company,” Di Piazza said on CNBC.
WBD also said earlier concerns over $1 billion from Tencent forced Paramount to remove the Chinese technology firm from its most recent bid, while Jared Kushner’s Affinity Partners has exited the consortium.
What happens next
If Paramount returns with a higher offer, Netflix would have the right to respond, potentially triggering a bidding contest. In a letter to shareholders Wednesday, Netflix said its agreement with WBD “is the right deal, with the right partner, at the right time.”
“The Warner Bros. Discovery Board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” said Ted Sarandos, Netflix’s co-CEO.
Ellison has previously signaled he is willing to raise his bid, telling WBD CEO David Zaslav before the Netflix deal closed: “Please note importantly we did not include ‘best and final’ in our bid.”
Despite that, Paramount on Wednesday reaffirmed its $30-per-share offer.
“We remain committed to bringing together two iconic Hollywood studios,” Ellison said in a statement. “Our proposal clearly offers WBD shareholders superior value and certainty.”
In an email to staff, David Zaslav said WBD continues to work toward closing the Netflix transaction, noting that the regulatory review process has already begun.
