Warner Bros board slams Paramount takeover bid as shareholders face $72B Netflix choice decision

Warner Bros. Discovery, Inc.'s board of directors urged shareholders to reject Paramount Skydance’s hostile takeover bid for the company, arguing that it poses "significant" risks and costs. 

The media behemoth said Wednesday that members of its board determined that the tender offer from Paramount Skydance was "not in the best interests" of the company or its shareholders, and that they continue to "unanimously" recommend the Netflix merger.

Warner Bros. Discovery agreed to sell its film and television studios and streaming platform, HBO Max, to Netflix in a cash-and-stock deal valued at $27.75 per share, putting the equity value at $72 billion, on Dec. 5. Within days of that announcement, Paramount announced an all-cash tender offer to acquire Warner Bros. for $30.00 per share in cash, with the company suggesting it was a "superior" offer.  

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But after reviewing Paramount's offer, the board argued that it doesn't qualify as a "Superior Proposal" compared to the merger agreement the company already announced with Netflix.

In a letter to shareholders, the board reiterated that Paramount's offer "provides inadequate value and imposes numerous, significant risks and costs." The board also attacked the deal, saying it misled shareholders by promising that Paramount's proposed transaction has a "full backstop" from the Ellison family, meaning a complete guarantee to provide all necessary funding for the deal. 

"It does not, and never has," the board wrote. 

Oracle co-founder Larry Ellison and his son David Ellison effectively took control of Paramount Global after its merger with Skydance Media closed in August. Warner Brothers board argued that the Ellison family has never committed to fully cover the required financing, which means Paramount's proposal does not have guaranteed funding.

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"Despite having been told repeatedly by WBD [Warner Brothers Discovery] how important a full and unconditional financing commitment from the Ellison family was — and despite their own ample resources, as well as multiple assurances by PSKY [Paramount Skydance] during our strategic review process that such a commitment was forthcoming — the Ellison family has chosen not to backstop the PSKY [Paramount Skydance] offer," the board wrote. 

In comparison, the board said that the company's merger with Netflix is a binding agreement with enforceable commitments, with no need for any equity financing and robust debt commitments. It's also fully backed by a public company with a market cap in excess of $400 billion with an investment-grade balance sheet, the board said. 

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Under the terms of the Netflix deal, the streaming platform would acquire Warner Bros. Discovery's film and television studios and streaming platform, HBO Max. Franchises, shows and movies such as "The Big Bang Theory," "The Sopranos," "Game of Thrones," "The Wizard of Oz" and the DC Universe will join Netflix’s extensive portfolio. 

Netflix said the deal will allow it to significantly expand U.S. production capacity and continue to grow investment in original content over the long term, which the company said will create jobs and strengthen the entertainment industry. 

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But the deal could face regulatory challenges as some lawmakers argue the merger would give Netflix too much control over content and distribution. 

Last month, Sen. Roger Marshall, R-Kan., sent a letter to the Department of Justice and the Federal Trade Commission saying that a deal between the two companies would create one of the largest content consolidations in modern media history, hurting consumers, workers and competition across the entertainment marketplace.