In a decisive move, the board of directors at Warner Bros. Discovery (WBD) has formally turned down a revised acquisition proposal from Paramount Global, solidifying its commitment to a previously agreed merger with streaming giant Netflix.
Board Cites Financial Risk and "Inadequate" Offer
In a letter to shareholders dated Wednesday, January 7, the WBD board labeled Paramount's latest bid as "inadequate" and packed with uncertainty. The board warned investors that accepting Paramount's offer would expose them to "materially more risk."
The core of the concern lies in the financing. Paramount, a company notably smaller than WBD, would need to shoulder over $50 billion in additional debt to fund the takeover, a structure the board compared to a risky leveraged buyout. This stands in stark contrast to the "certainty" offered by the Netflix agreement.
Netflix Deal vs. Paramount's Hostile Bid
The current path for WBD is a merger with Netflix, valued at $27.75 per share. This deal includes $23.25 in cash per share, with the remainder paid in Netflix stock. This agreement was reached after WBD CEO David Zaslav initiated a formal auction process last year.
Paramount's pursuit, led by its CEO David Ellison, began with an unsolicited bid for WBD assets, including CNN. After initial rejection, Paramount went public with a higher offer of $30 per share. To address financing concerns, Paramount announced on December 22 that Oracle billionaire Larry Ellison—David's father—would personally guarantee his $40.4 billion contribution to the proposed $78 billion transaction. Paramount also matched Netflix's breakup fee, raising it to $5.8 billion.
Sticking Points: Cable Assets and Future Path
Another major disagreement is over the value of WBD's cable television properties, such as CNN. These assets are not part of the Netflix deal and are scheduled to be spun off into a new public company called Discovery Global later this year. While WBD's board sees significant value in this standalone entity, Paramount has reportedly valued the unit at a mere $1 per share.
The board also recalled its initial concerns about Paramount's financing, which was expected to involve investors linked to Saudi Arabia, Qatar, and Abu Dhabi.
With the board's firm rejection, Paramount now faces limited options: withdraw, increase its bid further, or attempt to bypass the board by taking the offer directly to WBD's shareholders for a vote. The battle for one of entertainment's biggest giants continues.
