Warner Bros Discovery has formally advised its shareholders to reject a significantly increased hostile takeover offer from Paramount Skydance, valued at a colossal $108 billion (£80 billion). The media giant's board is instead urging investors to support a previously agreed merger with streaming leader Netflix.
The Battle for Warner Bros Intensifies
The corporate tussle escalated in late December when Paramount, controlled by the Ellison family, lodged a bid of $30 (£22.50) per share for Warner Bros. This move came just days after Warner Bros had agreed to a $72 billion (£54 billion) acquisition by Netflix in early December, a deal worth approximately $82.7 billion (£62 billion) including debts. Warner Bros immediately dismissed the Paramount approach as "inadequate."
In a bid to strengthen its proposal, Paramount updated its offer late last month with a crucial new element: an "irrevocable personal guarantee" from Oracle founder Larry Ellison. Ellison, who is the father of Paramount CEO David Ellison, pledged to back $40.4 billion (£29.6 billion) in equity financing for the bid. Paramount also increased its promised break-up fee to shareholders to $5.8 billion (£4.3 billion) if regulators block the deal, matching a similar pledge from Netflix.
Board Cites Superior Value and Certainty with Netflix
Despite these enhancements, the Warner Bros board remains unconvinced. Samuel Di Piazza Jr, Chairman of the Warner Bros board, stated the board had unanimously determined that Paramount's latest offer is inferior to the Netflix agreement. He highlighted concerns over the proposed deal's structure and risks.
"Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed," Di Piazza said. "Our binding agreement with Netflix will offer superior value at greater levels of certainty."
A key difference between the two proposals is their scope. Netflix has agreed to purchase the Warner Bros Discovery film and TV studios business. Under that plan, Warner's news and cable operations, including CNN, would be spun off into a separate company. In contrast, Paramount has bid for the entirety of Warner Bros Discovery.
Regulatory Hurdles Loom Large
The potential for regulatory intervention casts a long shadow over both proposed deals. Former US President Donald Trump has already warned that the Netflix takeover of Warner Bros "could be a problem" due to the combined market share, confirming he would be involved in any government approval decision.
Paramount has argued in its appeal to shareholders that its offer would be more likely to pass regulatory scrutiny. The company also revealed that before taking its bid directly to investors, it had made six separate takeover approaches to Warner Bros over a 12-week period, but claimed Warner Bros "never engaged meaningfully." The battle for one of Hollywood's most storied studios is set to continue, with shareholders now holding the decisive vote.
