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Warner Bros. Discovery on Wednesday urged shareholders to reject Paramount Skydance’s $108.4 billion hostile bid, arguing that it created “significant risks and costs” for the company and that Netflix’s prior offer provides better value.
The move follows competing bids for Warner Bros. Discovery, whose storied film library includes classics like “Casablanca” and the “Harry Potter” film series. Netflix agreed on December 5 to buy a part of Warner Bros. in a deal valued at $82.7 billion, while Paramount Skydance followed on Dec. 8 with an all-cash $30 per share for the entirety of the media conglomerate.
Netflix agreed to buy Warner Bros.’s HBO as well as its streaming and studios business, including HBO Max and Warner Bros. Television, for $27.75 a share.
In making the bid for all of Warner Bros. Discovery, Paramount Skydance CEO David Ellison described it as a “superior all-cash offer.” Ellison said that combining the assets of Warner Bros. Discovery with Paramount Skydance (the parent of CBS News) would face an easier path through the government regulatory process.
A spokesperson for Paramount Skydance didn’t immediately respond to a request for comment.
In recommending that shareholders reject Paramount Skydance’s bid, Warner Bros. Discovery said its board concluded the two offers pose an equal regulatory risk. Warner Bros. Discovery also said its analysis found that Netflix’s offer, which includes cash and Netflix stock, is superior.
It also raised concerns about Paramount Skydance’s $40.65 billion equity commitment, for which Warner Bros. Discovery said “there is no Ellison family commitment of any kind.” David Ellison’s father, Oracle CEO Larry Ellison, is the world’s fifth-richest person, with a net worth of $243 billion, according to the Bloomberg Billionaires Index.
Warner Bros. Discovery’s recommendation comes shortly after one of Paramount Skydance’s financial partners in the deal, Affinity Partners, said it had dropped out of the hostile bid. Affinity is the private equity firm founded by President Trump’s son-in-law, Jared Kushner.
An Affinity spokesperson told CBS News that, while it continued to believe in the “strong strategic rationale” for Paramount Skydance’s offer, it had decided to pull back because “the dynamics of the investment have changed significantly since we initially became involved in October.”
In a letter sent to shareholders, Warner Bros. Discovery’s board said it believed Netflix’s finances are also in better shape, with a stronger credit rating and a larger market capitalization.
“The Netflix merger is fully backed by a public company with a market cap in excess of $400 billion with an investment grade balance sheet,” the letter stated.
Paramount Skydance’s credit rating is “at or only a notch above ‘junk’ status from the two leading rating agencies,” while its market valuation stands at $15 billion, Warner Bros. Discovery added.
Warner Bros. Discovery also expressed concern about Paramount Skydance’s plan to use a revocable trust to provide debt financing as part of its offer.
“The assets and liabilities of the trust are not publicly disclosed and are subject to change,” its shareholder letter stated. “As the name indicates, revocable trusts typically have provisions allowing for assets to be moved at any time.”
While Wednesday’s letter to shareholders means Paramount’s is not the offer favored by Warner Bros.’ board, shareholders can still decide to tender their shares in favor of Paramount’s offer for the entire company, including cable assets such as CNN, Discovery and TNT.
