Warner Bros. Stands by Netflix Deal After Rejecting Paramount’s Sweetened Bid

According to Bloomberg, the decision follows a renewed push by Paramount after billionaire Larry Ellison said he would personally back $40.4 billion in equity financing for a hostile offer valuing Warner Bros. shares at $30 each. Despite that assurance, Warner Bros.’ board said in a letter to shareholders on Wednesday that it remains unconvinced Paramount can successfully close the transaction and that the proposal involves far greater uncertainty than the Netflix deal, which values part of the company at $27.75 per share in a mix of cash and stock.

Financing remains the central concern. Per Bloomberg, Warner Bros. reiterated that Paramount would need to secure more than $50 billion in borrowing to complete the acquisition. With Paramount’s market capitalization hovering around $14 billion, the bid would require roughly $94.65 billion in combined debt and equity financing, nearly seven times Paramount’s current market value. Warner Bros. warned that such a structure significantly raises the risk that the transaction could fall apart before completion. “The extraordinary amount of debt financing as well as other terms of the PSKY offer heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” the company said in its letter. It added that shifts in financial performance, market conditions, or the broader industry could undermine the financing commitments.

Read more: EU Weighs Potential Role as Competing Bids for Warner Bros. Discovery Intensify

The rejection marks another escalation in a protracted and increasingly tense contest for control of one of Hollywood’s most prominent media companies. According to Bloomberg, Paramount, controlled by Oracle Corp. Chairman Larry Ellison and his son David, has spent months trying to lure Warner Bros. away from Netflix, but its efforts have repeatedly been rebuffed. The prize includes iconic film franchises such as Batman and Harry Potter, along with HBO, one of the most valuable brands in television.

Warner Bros. announced its agreement with Netflix on Dec. 5, outlining plans to sell its studios and streaming operations while spinning off its cable television networks to shareholders ahead of the deal’s completion. Paramount’s proposal, by contrast, seeks to acquire the entire company, including the cable assets. Either transaction would have far-reaching implications for the entertainment industry, reshaping content ownership and streaming competition, per Bloomberg.

Market reaction was muted. Warner Bros. shares were little changed at about $28.50 in early New York trading, while Paramount shares dipped less than 1% to roughly $12.48. Netflix stock rose about 1.3% to $91.80.

After losing out to Netflix, Paramount took its case directly to Warner Bros. shareholders on Dec. 8, launching a tender offer to buy shares for $30 apiece in cash. Investors have until Jan. 21 to decide whether to tender their shares.

“Warner Bros. Discovery’s rejection of Paramount’s amended $30-a-share bid suggests the M&A saga is far from over,” Bloomberg Intelligence analyst Geetha Ranganathan wrote in a note. “We believe Paramount would need to raise its offer to at least $32 per share to bring Warner back to the table.”

Warner Bros. also pointed to operational constraints embedded in Paramount’s proposal. According to Bloomberg, the board said those terms would limit the company’s ability to conduct business ahead of closing, including restrictions on entering technology infrastructure contracts exceeding $30 million annually. The board warned such limits could harm Warner Bros.’ operations over the next year to year and a half and potentially give Paramount an opening to walk away from the deal before it is finalized.

Source: Bloomberg