Warner Bros Discovery on Tuesday turned down Paramount Skydance’s latest $30-a-share hostile offer but granted the bidder seven days to submit what it called a “best and final” proposal, according to Reuters. The move signals that while the entertainment giant is willing to listen, it remains aligned with its existing merger agreement with Netflix.
In a letter sent to Paramount’s board, Warner Bros Chairman Samuel DiPiazza Jr. and CEO David Zaslav made clear the company’s current stance. “Our Board has not determined that your proposal is reasonably likely to result in a transaction that is superior to the Netflix merger,” the executives wrote. “We continue to recommend and remain fully committed to our transaction with Netflix.”
Paramount has until February 23 to revise its bid. Under the terms of the Netflix agreement, the streaming company would have the right to match any improved offer, per Reuters. While Paramount recently floated an informal indication it could raise its price to $31 per share, Warner Bros indicated that figure would need to be exceeded for serious consideration.
The high-stakes contest underscores the strategic value of Warner Bros’ film and television portfolio, which spans classic titles such as “Casablanca” and “Citizen Kane” as well as enduring franchises including “Friends” and “Batman.” Control of the studio would provide the acquirer with a deep content library and established brands at a time when media companies are racing to scale up amid shifting consumer habits, according to Reuters.
Paramount’s current proposal values the entire company at $108.4 billion. By contrast, Netflix has offered $27.75 per share, or $82.7 billion, for Warner Bros’ studio and streaming operations alone, per Reuters. Shares of Paramount rose 6% following the latest developments, while Warner Bros Discovery climbed 2.3%. Netflix shares edged down 1.4%.
Warner Bros is pressing ahead with a shareholder vote on the Netflix deal scheduled for March 20. If approved, the transaction would proceed after Warner Bros spins off its Discovery Global cable networks — including CNN, TLC, Food Network and HGTV — into a separately traded entity. The company has estimated that the spinoff could be valued between $1.33 and $6.86 per share, according to Reuters.
Related: Warner Bros Discovery Considers Renewed Talks With Paramount
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Although Warner Bros has previously rejected Paramount’s overtures, its decision to engage reflects a shift in posture. Paramount has maintained that its prior approaches were not meaningfully considered before Warner Bros struck its December 5 merger agreement with Netflix. A hostile bid launched shortly afterward was rejected, and a revised proposal backed by a $40 billion personal equity guarantee from Oracle founder Larry Ellison — whose son, David Ellison, leads Paramount — was also turned down in early January, per Reuters.
Pressure from activist investor Ancora Holdings has further complicated the situation. The hedge fund has built a significant stake in Warner Bros and plans to oppose the Netflix transaction, arguing the board did not adequately explore Paramount’s full-company bid. Pentwater Capital Management, which holds roughly 50 million shares, has backed Paramount’s efforts and is pushing to add directors to Warner Bros’ board.
“Every substantive complaint that the Warner Bros board had with Paramount’s previous offer has been addressed,” Pentwater CEO Matt Halbower said in an interview last week.
Netflix, for its part, said the deal has reached a critical stage as shareholders prepare to vote. “While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” the company said in a statement.
Financing remains a sticking point. Paramount recently sweetened its bid by offering additional cash to Warner Bros shareholders for each quarter the transaction fails to close after this year and by agreeing to cover a $2.8 billion breakup fee owed to Netflix if the deal were abandoned, according to Reuters. However, Warner Bros’ board said unresolved issues persist, including responsibility for a potential $1.5 billion junior lien financing fee and contingencies if debt funding were to fall through.
In its letter, the board noted that while Paramount has downplayed financing risks given “the personal wealth of your lead equity sponsor and the credibility of your lending banks,” draft agreements require additional equity funding if debt financing becomes unavailable to ensure completion of the transaction.
Both proposed deals are expected to draw regulatory scrutiny amid concerns over potential price increases for consumers and the impact on creative industries. Paramount and Netflix have said they are in discussions with competition authorities, including the U.S. Department of Justice, according to Reuters.
Source: Reuters
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