On Wednesday, Warner Bros. Discovery (WBD) formally rejected the $108.4 billion acquisition offer from Paramount, deeming the bid as “illusory and misleading.” The board of directors of WBD accused the film giant of misleading shareholders on financing guarantees.
Currently, Paramount is fiercely competing with Netflix for control of WBD, targeting assets such as the film and television studio, HBO Max streaming service, and top-tier franchises like “Harry Potter.” Following WBD’s acceptance of Netflix’s $72 billion offer, Paramount launched this competitive takeover bid in an attempt to outmaneuver them.
In a letter to shareholders, the WBD board pointed out that Paramount’s claim of a cash offer of $30 per share, fully guaranteed by Oracle founder Larry Ellison’s family, “never existed,” and deemed the offer to carry significant risks.
The board stated that Paramount’s offer is inferior to the merger agreement reached with Netflix. Netflix’s cash and stock option of $27.75 per share is considered a legally binding agreement that does not require additional equity financing and comes with robust debt commitments. Furthermore, Affinity Partners under Jared Kushner confirmed their withdrawal from Paramount’s bidding process.
Paramount CEO David Ellison retaliated, accusing the WBD board of “misleading” tactics, emphasizing that their all-cash offer can effectively withstand market volatility and provide higher value to shareholders.
However, the WBD board refuted this, stating that Paramount’s equity commitments do not directly come from the Ellison family but are backed by an opaque “revocable trust fund” with undisclosed assets and liabilities, potentially subject to withdrawal at any time.
The board particularly highlighted the difference in strength between the two bidders. Netflix holds an investment-grade rating with a market value exceeding $400 billion, while Paramount’s market value is only $15 billion, with a credit rating approaching “junk status.”
WBD cautioned that merging with Paramount would increase the company’s debt ratio to 6.8 times its operating income, and Paramount’s proposed $9 billion “synergies” could lead to massive layoffs, making “Hollywood weaker”. On Wednesday’s closing, WBD’s stock price fell by 1.2%, Netflix rose by 2.5%, and Paramount dropped by 4.8%.