Warner Bros Discovery’s board has unanimously rejected Paramount Skydance’s latest hostile takeover bid, arguing that the revised $108.4 billion proposal represents a highly risky leveraged buyout that shareholders should oppose.
In a letter to investors issued on Wednesday, the board said Paramount’s offer relies on an “extraordinary level of debt financing,” raising serious concerns about the certainty of completing the transaction. The board reaffirmed its support for Netflix’s $82.7 billion agreement to acquire Warner Bros’ film and television studio and related assets.
Paramount and Netflix have been locked in an intense bidding battle for Warner Bros Discovery, which owns major film and television studios and a vast content library featuring franchises such as Harry Potter, Game of Thrones, Friends and the DC Comics universe, as well as classic titles including Casablanca and Citizen Kane.
The board voted on Tuesday to reject Paramount’s $30-per-share all-cash offer, warning that the deal would leave the combined company burdened with about $87 billion in debt, making it the largest leveraged buyout ever. Warner Bros laid out its objections in a 67-page amended merger filing accompanying the shareholder letter.
The board said Paramount’s revised proposal still falls short, citing inadequate value, uncertainty over Paramount Skydance’s ability to close the deal, and significant financial risks for Warner Bros shareholders if the transaction fails. This assessment came despite Paramount’s plan to finance the bid with $40 billion in equity personally guaranteed by Oracle co-founder Larry Ellison, father of Paramount CEO David Ellison, and $54 billion in debt.
The decision keeps Warner Bros on track to proceed with its agreement with Netflix, even after Paramount updated its offer on December 22 to address earlier concerns about the lack of a personal guarantee.
Netflix co-CEOs Ted Sarandos and Greg Peters welcomed the board’s decision, saying it recognised Netflix’s proposal as the superior offer in terms of value for shareholders, as well as benefits for consumers, creators and the wider entertainment industry.
Warner Bros also warned that Paramount’s financing structure would further pressure its already junk-rated credit profile and strain cash flow, increasing the risk that the transaction would not close. Netflix, which has offered $27.75 per share in cash and stock, has a market capitalisation of about $400 billion and an investment-grade credit rating.
Paramount declined to comment. Following the announcement, shares of Warner Bros and Netflix rose 0.6%, while Paramount’s stock fell 0.6%.
The takeover contest has become one of Hollywood’s most closely watched deals, as studios navigate an industry increasingly dominated by streaming and volatile theatrical revenues. While Netflix’s offer carries a lower headline valuation, some analysts say it offers greater certainty and fewer execution risks than Paramount’s bid, which includes Warner Bros’ cable television business.
Not all investors agree. Mario Gabelli, whose Gabelli Funds owns roughly 5.7 million Warner Bros shares, said he is likely to tender his stake to Paramount, describing the all-cash bid as more straightforward and potentially faster to clear regulators. By contrast, Harris Oakmark, Warner Bros’ fifth-largest shareholder, has said Paramount’s offer remains insufficient, including to cover potential breakup fees. Pentwater Capital, the seventh-largest shareholder, has also urged the board to engage with Paramount.
A key point of contention remains the valuation of Warner Bros’ planned spin-off of its cable television assets, including CNN, TNT Sports and Discovery+, under the Discovery Global unit. Analysts estimate the assets could be worth up to $4 per share, while Paramount has valued them at around $1.
The proposed deal has also drawn political scrutiny, with lawmakers from both parties voicing concerns over further consolidation in the media sector. U.S. President Donald Trump has said he plans to weigh in on the potential acquisition.
Warner Bros chairman Samuel Di Piazza told CNBC the company is not currently in talks with Paramount but remains open to a compelling proposal. The board acknowledged some improvements in Paramount’s amended offer, including Larry Ellison’s personal guarantee and a higher reverse termination fee, but concluded that the costs and risks remained significantly higher than those associated with the Netflix deal.
Ending its agreement with Netflix would require Warner Bros to pay a $2.8 billion termination fee, contributing to an estimated $4.7 billion in additional costs. The board also reiterated concerns that Paramount would impose operating restrictions that could weaken Warner Bros’ competitive position, including blocking the planned spin-off of its cable networks into a separate publicly listed company.
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