Warner Bros Discovery has formally rejected Paramount Skydance’s $108.4 billion hostile takeover bid, citing inadequate financing assurances and elevated risks for shareholders. In a letter disclosed through a regulatory filing, the Warner Bros Discovery board said the Paramount proposal failed to meet the company’s standards for certainty, transparency and shareholder value, CNBC reports.
The board accused Paramount Skydance of repeatedly misleading Warner Bros Discovery shareholders by claiming its $30-per-share cash offer was fully guaranteed, or backstopped, by the Ellison family led by Oracle CEO Larry Ellison. According to the board, such a guarantee “does not, and never has” existed.
Board Calls Paramount Offer Inferior and Risky
Warner Bros Discovery said Paramount’s bid presented “numerous, significant risks,” particularly around its financing structure. The board highlighted that the most recent Paramount proposal relied on an equity commitment backed not directly by the Ellison family, but by the Lawrence J. Ellison Revocable Trust.
The board described the trust as “unknown and opaque,” noting that its assets and liabilities are not publicly disclosed and can change at any time. It added that a revocable trust is not a substitute for a full and unconditional financing commitment from a controlling shareholder.
Despite repeated feedback from Warner Bros Discovery on the need for a clear backstop, the board said the Ellison family chose not to directly guarantee the Paramount Skydance offer.
Netflix Merger Deemed Superior
In contrast, the board reaffirmed its support for the merger agreement with Netflix, which values Warner Bros Discovery assets at $27.75 per share. The Netflix deal covers the company’s film and television studios, content library and the HBO Max streaming service.
According to the board, the Netflix transaction is a binding agreement that requires no equity financing and is supported by strong debt commitments. Netflix’s market capitalization of more than $400 billion and its investment-grade balance sheet were cited as major advantages.
Netflix co-CEO Ted Sarandos welcomed the decision, stating that the board’s move reinforced the superiority of Netflix’s offer and its alignment with shareholder interests. Co-CEO Greg Peters said Netflix was already engaging with regulators in the United States and Europe and expressed confidence that the deal would be viewed as pro-consumer and pro-growth.
Concerns Over Paramount’s Financial Strength
Warner Bros Discovery raised questions about Paramount’s financial condition and creditworthiness. Paramount has a market capitalization of around $15 billion and a credit rating just above junk status, the board noted.
If the Paramount deal were completed, the combined company would carry debt equivalent to 6.8 times operating income, with virtually no current free cash flow. The board warned that Paramount’s proposed operating restrictions during the period between signing and closing could limit content licensing and strategic flexibility.
Paramount’s plan to generate $9 billion in synergies was described as operationally ambitious and likely to result in further job losses, which the board said would weaken Hollywood rather than strengthen it.
Regulatory and Deal Certainty Factors
While Paramount has argued that it has arranged airtight financing, including $41 billion in new equity and $54 billion in debt commitments, Warner Bros Discovery said the structure was cross-conditional and exposed shareholders to material downside risk. The board also pointed out that Paramount’s offer could be terminated or amended at any time, unlike the binding Netflix merger agreement.
Netflix has offered a higher breakup fee of $5.8 billion, compared with Paramount’s $5 billion, further strengthening its proposal in the eyes of the board.
Next Steps for Shareholders
Warner Bros Discovery has not yet set a date for the shareholder vote on the Netflix deal, but Chairman Samuel Di Piazza said it is expected in spring or early summer. The board said it had held dozens of meetings and calls with Paramount executives and advisers, but concluded that none of Paramount’s six bids surpassed the Netflix agreement.
