Warner Bros. Discovery has rejected Paramount’s revised hostile takeover offer, urging shareholders to back its “safer, superior” $108.5 billion deal with Netflix instead.
The Warner Bros. board of directors officially rejected Paramount’s amended bid for the company, claiming that the offer does not match the value or structure of the current Netflix agreement, citing concerns over Paramount’s ability to close the deal as a result of heavy reliance on debt financing.
The battle for Warner Bros. is extremely complex as Netflix and Paramount have pursued very different acquisition packages. Netflix’s offer targets only Warner Bros. studio and streaming businesses, while Paramount is seeking to buy the entire company, encompassing networks like CNN and Discovery.
If Netflix succeeds, Warner’s news and cable operations would be spun off into a separate company, following a previously announced plan.
Any merger with either suitor could take more than a year to complete and faces intense regulatory scrutiny. The US Justice Department is likely to review the deal closely and could attempt to block it or demand changes, while overseas regulators may also have to intervene.
Even after amending their original offer Warner Bros. claimed Paramount “didn’t raise the price” and the amended bid remained financially unattractive.
In a letter from Paramount to Warner Bros. shareholders, Paramount aimed to persuade shareholders that their offer was financially superior to Netflix’s deal.
Paramount highlighted several risks involved in the Netflix deal, including stock volatility and potential reductions in purchase price due to debt allocation. Taking these risks into account, Paramount has argued that their amended $30 per share cash offer bid is of higher value.
Paramount stressed that its financing was fully secure, with $41 billion in equity, fronted by RedBird Capital and the Ellison family and another $54 billion in debt financing from banks. The offer is not contingent on Paramount’s financial position, and it is believed that it will be faster and easier to close the Netflix bid.
In response, Warner Bros. issued a letter to all its shareholders and warned that walking away from the current Netflix agreement would trigger billions in excess costs, including termination fees. The letter stated Paramount’s bid as “inadequate” and of “insufficient value”.
Paramount and some shareholders have argued that the Warner Bros. board is failing its fiduciary duty by refusing to engage, and has suggested Paramount further improve its bid.
Paramount has maintained its offer has a clearer regulatory path than Netflix’s, while Warner and Netflix seem confident regulators will approve their current deal.
