Warner Bros. Discovery Rejects Paramount Bid, Says Offer Posed ‘Untenable Degree Of Risk’ For Shareholders

• The decision follows an extended strategic review process that evaluated multiple proposals and potential outcomes.
• In a letter to the shareholders, the WBD board determined that the Paramount Skydance proposal fails to qualify as a ‘superior proposal’.
• Directors emphasized that the Netflix transaction offers clearer value and greater certainty than the competing bid.

Warner Bros. Discovery, Inc. (WBD) announced on Wednesday that its board of directors unanimously concluded that a tender offer from Paramount Skydance Corp. (PSKY) does not serve shareholders’ best interests, reinforcing support for the company’s previously announced merger with Netflix, Inc. (NFLX). 

The decision follows an extended strategic review process that evaluated multiple proposals and potential outcomes.

Board Reaffirms Netflix Deal

In a letter to the shareholders, the WBD board determined that the Paramount Skydance proposal fails to qualify as a ‘superior proposal’ under the terms of its merger agreement and urged investors not to tender their shares.

The board said that Paramount’s proposal raised red flags related to funding stability and deal structure. 

“PSKY's most recent proposal includes a $40.65 billion equity commitment, for which there is no Ellison family commitment of any kind. Instead, they propose that you rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding.”

-Board of Directors, Warner Bros. Discovery

Value And Certainty At Center Of Decision

Directors emphasized that the Netflix transaction offers clearer value and greater certainty than the competing bid. Under the Netflix agreement, shareholders are set to receive a mix of cash and equity, along with future participation tied to the separation of Discovery Global. 

The board described the overall consideration as compelling when measured against financial, execution, and timing risks. After consulting regulatory advisors, the board found no meaningful difference in antitrust or approval risks between the Netflix merger and the Paramount Skydance proposal. It pointed out that Netflix has agreed to a record $5.8 billion regulatory termination fee, well above PSKY’s $5 billion break fee.

WBD stock traded 1% lower in Wednesday's premarket. On Stocktwits, retail sentiment around the stock changed to 'bearish' territory from 'neutral' the previous day.

Illusory Offer

The directors highlighted that the PSKY offer is not a binding agreement and can be changed or withdrawn at any time. Its terms allow amendments, including to the price, and it cannot be completed by the current expiration date.

“The PSKY offer provides an untenable degree of risk and potential downside for WBD shareholders,” added the board. 

The board also warned that accepting the competing offer could trigger billions of dollars in termination and financing costs, and reaffirmed that it is moving ahead with Netflix’s deal.  

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