Warner Bros Discovery has urged shareholders to reject a $108.4bn hostile takeover offer from Paramount Skydance, branding it “inadequate” amid an extraordinary corporate battle to control the legacy media conglomerate.
WBD agreed to sell its storied movie studios, HBO cable network and streaming service to Netflix in a $82.7bn deal earlier this month, setting the stage for a seismic shift in Hollywood’s industrial landscape.
But Paramount, which had privately bid for WBD before the Netflix deal was unveiled, swiftly countered with an all-cash offer and vowed to take it directly to shareholders. Unlike Netflix, Paramount – which is controlled by the billionaire Ellison family – bid for the entire company, which also includes the CNN news network.
In a blunt letter to shareholders on Wednesday morning, WBD accused Paramount of having “consistently misled” investors by claiming its bid has a “full backstop” – a safety net to ensure it has sufficient funds – from the Ellisons.
Paramount did not immediately respond to a request for comment.
“Following a careful evaluation of Paramount’s recently launched tender offer, the Board concluded that the offer’s value is inadequate, with significant risks and costs imposed on our shareholders,” Samuel A Di Piazza Jr, chairman of WBD’s board, said in a statement. “This offer once again fails to address key concerns that we have consistently communicated to Paramount throughout our extensive engagement and review of their six previous proposals.
“We are confident that our merger with Netflix represents superior, more certain value for our shareholders and we look forward to delivering on the compelling benefits of our combination.”
One media analyst likened the saga to a “real-life, far more consequential” episode of the HBO drama Succession. “If you think you know how this plot ends, think again,” said Mike Proulx, vice-president of research at Forrester.
“WBD’s formal rejection of Paramount’s offer changes nothing,” he said. “The ultimate decision still rests with WBD’s shareholders and that vote is months away. What’s clear about Paramount’s bid are the growing eyebrow raises over its Middle Eastern financing. The same US officials and regulators who’ve sounded alarms about China’s influence on TikTok should be crying foul here.”
Ted Sarandos, co-chief executive of Netflix, welcomed WBD’s response to Paramount. “The Warner Bros Discovery board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” he said in a statement to Reuters.
Netflix was already engaging with the justice department and European Commission, the company’s other co-chief executive, Greg Peters, told CNBC. He expressed confidence that the regulators would view the deal as “pro-consumer and pro-growth”.
Questions were swiftly raised about how the Ellisons were funding their proposal, after a regulatory filing revealed it was backed by outside funders including Affinity Partners, an investment firm founded by Donald Trump’s son-in-law Jared Kushner; Saudi Arabia’s Public Investment Fund; and the Qatar Investment Authority.
On Tuesday, it emerged Kushner’s Affinity Partners, a private equity firm, had stepped back from the process.
Di Piazza, the WBD chairman, described on the company’s decision to advise investors to reject Paramount as “not a hard choice” in an interview on Wednesday.
“Netflix made a compelling offer – it was heavy in cash, certainty of close, a high termination fee, and they responded to the operating issues that we were concerned about,” Di Piazza told CNBC, the financial news network. “[Paramount] had every opportunity to deal with that broad range of issues, and they chose not to.”
WBD accused Paramount of leaning on an “unknown and opaque revocable trust” to shore up its bid and tabling an “illusory” proposal that WBD shareholders should not rely on.
In its letter to shareholders, WBD firmly denied that regulators were more likely to approve Paramount’s bid than its deal with Netflix, and warned of “significant additional costs” – including a $2.8bn termination fee to Netflix – if the Paramount offer was accepted.
“None of these reasons will be a surprise to [Paramount] given our clear, and oft-repeated, feedback on their six prior proposals,” WBD claimed in its letter to shareholders. “The terms of the Netflix merger are superior.”
Trump has said he plans to be involved in deciding whether any deal will receive approval from regulators – and made clear that he views the future of CNN, which he has long criticized, as a key factor.
“I think CNN should be sold, because I think the people that are running CNN right now are either corrupt or incompetent,” Trump said last week.
Trump has also tried in recent days to distance himself from the Ellisons, using his long-held grudge with CBS – which is owned by Paramount – over its 60 Minutes show to reverse his previous warmth towards the family.
“For those people that think I am close with the new owners of CBS, please understand that 60 Minutes has treated me far worse since the so-called ‘takeover,’ than they have ever treated me before. If they are friends, I’d hate to see my enemies!” he wrote in a post on his Truth Social network earlier this week.
Reuters contributed to this report
