The board of Warner Bros. Discovery (WBD) has once again rejected Paramount’s revised takeover bid, reaffirming its preference for an existing deal with Netflix and warning shareholders that Paramount’s proposal remains “too risky.”
In a letter to shareholders on Wednesday, January 7, the WBD board described Paramount’s latest offer as “inadequate” and fraught with uncertainty, despite claims by Paramount that it had addressed key concerns raised by Warner Bros. executives.
According to the board, Paramount’s bid closely resembles a leveraged buyout, relying heavily on borrowed funds to complete the transaction. Paramount, which is significantly smaller than WBD, would need to take on more than $50 billion in additional debt through multiple financing arrangements to acquire the company.
“This structure poses materially more risk for WBD and its shareholders,” the board said, contrasting it with what it called the “certainty” of the Netflix merger.
Paramount has attempted to ease concerns about its financing by highlighting the backing of Oracle billionaire Larry Ellison, who is helping bankroll the proposed takeover. His son, David Ellison, Paramount’s chief executive, sparked the bidding war last year with an unsolicited approach for WBD’s assets, including CNN.
Following that bid, WBD, led by CEO David Zaslav, launched a formal auction process and ultimately accepted Netflix’s offer, valued at $27.75 per share. The deal includes $23.25 in cash, with the remainder in Netflix stock.
Paramount later went public with a higher offer of $30 per share after being rebuffed by the WBD board. However, the board has continued to insist that Paramount’s proposal is inferior, citing both the scale of the debt involved and what it described as onerous conditions attached to the offer.
Another key issue raised by WBD is the value of its cable television assets, which are not included in the Netflix deal. These assets, including CNN, are set to be spun off into a separate publicly traded company, Discovery Global, later this year. While the WBD board believes Discovery Global could hold significant standalone value, Paramount has reportedly valued the unit at just $1 per share.
When Paramount first launched its hostile bid, WBD dismissed the proposal as “illusory” and raised concerns about its financing, some of which was expected to come from investors linked to Saudi Arabia, Qatar and Abu Dhabi.
In response, Paramount announced on December 22 that Larry Ellison would personally guarantee the $40.4 billion he is contributing toward the proposed $78 billion transaction. Paramount also increased its breakup fee to $5.8 billion, matching Netflix’s agreed penalty, but did not raise its $30-per-share offer.
With the board’s latest rejection, Paramount now faces a choice: walk away, increase its bid, or take the fight directly to WBD shareholders. Because the offer is hostile, Paramount could still seek a shareholder vote that might override the board’s recommendation if investors find the proposal more attractive.
