Warner Bros. Discovery's board has advised shareholders to reject an amended takeover offer from Paramount, labelling the bid as 'inferior' to a signed merger agreement with Netflix. In a letter to shareholders on Wednesday, the board stated that the Netflix deal maximises value while mitigating downside risks, and unanimously recommended it as in the best interest of shareholders.
The board's decision, taken at a meeting on Tuesday, was unanimous. Netflix welcomed the continued commitment, with co-CEOs Ted Sarandos and Greg Peters emphasising the complementary strengths of the two companies and their shared passion for storytelling. Netflix has set up a dedicated website, NetflixWBtogether.com, to outline the benefits of the merger.
Warner Bros. Discovery has a deal to sell its studios and streaming assets to Netflix for cash and stock worth $27.75 per share. Paramount is offering $30 per share in cash for the entire company. However, the board highlighted significant downside risks associated with the Paramount offer, including potential termination fees and debt exchange costs totalling $4.7 billion, which would reduce the net cash from Paramount's $5.8 billion termination fee to just $1.1 billion in the event of a failed transaction.
In contrast, the Netflix transaction also carries a $5.8 billion breakup fee but imposes none of these additional costs on Warner Bros. Discovery. The board concluded that the risk-adjusted value of the Paramount offer is not superior to the Netflix merger.
Paramount, led by David Ellison, believes its deal has an easier path to regulatory approval, expecting closure in 12 to 18 months. However, Warner Bros. Discovery sees no material difference in regulatory risk between the two deals. Netflix has submitted its Hart-Scott-Rodino filing and is engaging with competition authorities, including the US Department of Justice and European Commission.
Paramount has made six offers, with the last two going hostile and directed at Warner Bros. Discovery shareholders, who have until 21 January to tender their shares. Paramount has set up a website, Strongerhollywood.com, to present its case. Despite Paramount's insistence that it has addressed all concerns, Warner Bros. Discovery denied this, stating that Paramount has repeatedly failed to submit a proposal that addresses the deficiencies identified by the board.
