NEW YORK (AP) — Warner Bros. again rejected Paramount’s takeover bid and told shareholders Wednesday to stick with a rival offer from Netflix.
Warner’s leadership has repeatedly rejected offers from Skydance-owned Paramount — and just weeks ago urged shareholders to support the sale of its streaming and studios business to Netflix for $72 billion. Meanwhile, Paramount has made efforts to improve its unfavorable $77.9 billion offer for the entire company.
Warner Bros. Discovery said Wednesday that its board determined that Paramount’s offer is not in the best interests of the company or its shareholders. It again recommended shareholders support the Netflix deal.
“Paramount’s offer continues to provide inadequate value, including terms such as an extraordinary amount of debt financing that create the risk of closing and a lack of protection for our shareholders if the transaction is not completed,” Warner Bros. Discovery Chairman Samuel Di Piazza Jr. said in a statement. In contrast, he said, the company’s deal with Netflix “will provide better value at a higher level of certainty.”
Paramount did not immediately respond to a request for comment. The company’s adverse bid is still on the table. Warner shareholders currently have until January 21 to “tender” their shares.
Late last month, Paramount announced an “irrevocable personal guarantee” from Oracle founder Larry Ellison – who is the father of Paramount CEO David Ellison – to back $40.4 billion in equity financing for the company’s offering. If the deal is blocked by regulators, Paramount has increased its promise to shareholders to $5.8 billion, the equivalent of Netflix’s breakup fee.
In its Wednesday letter to shareholders, Warner expressed concerns about a potential deal with Paramount. Warner said it essentially considered the offer to be a leveraged buyout, involving too much debt, and also pointed to the operational restrictions that were imposed by Paramount’s offer and “may hinder WBD’s ability to perform” throughout the transaction.
The battle for Warners and the value of each offer becomes complicated because Netflix and Paramount want different things. Netflix’s proposed acquisition only includes Warner’s studios and streaming business, including its legacy TV and film production arms and platforms like HBO Max. But Paramount wants the entire company – beyond the studios and streaming, to include networks like CNN and Discovery.
If Netflix is successful, Warner’s news and cable operations will be transferred into their own company, as part of a previously announced separation.
A merger with either company could take more than a year to close – and would attract tremendous antitrust scrutiny along the way. Due to its size and potential impact, this would almost certainly trigger a review by the US Justice Department, which could sue to block the transaction or request changes. Other countries and foreign regulators may also challenge the merger. Politics are also expected to be active under President Donald Trump, who has made unprecedented suggestions about his personal involvement in whether a deal will be reached.
