Warner Bros. rejects revised Paramount bid as risky leveraged buyout
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Warner Bros. Discovery’s board has unanimously rejected Paramount Skydance’s latest attempt to acquire the studio, saying its revised $108.4 billion US hostile bid is a risky leveraged buyout that investors should reject.
In a letter to shareholders on Wednesday, the company’s board said Paramount’s offer depends on “an extraordinary amount of debt financing” that increases the risk of closing. It reaffirmed its commitment to streaming giant Netflix’s $82.7 billion deal for film and television studios and other assets.
Paramount and Netflix are competing to gain control of Warner Bros. and its prized film and television studios and extensive content library. Its lucrative entertainment franchises include harry potter, game of thrones, friends and the DC Comics universe, as well as iconic classic films casablanca And citizen Kane,
Paramount’s financing plan would pile $87 billion of debt on the smaller Hollywood studio after the acquisition closes, making it the largest leveraged buyout in history, the Warner Bros. board told shareholders Tuesday after voting against a $30-per-share cash offer. The letter was accompanied by a 67-page amended merger filing laying out its case for rejecting Paramount’s proposal.
Paramount Skydance made a US$108 billion hostile takeover bid for Warner Bros. Discovery just days after Netflix announced it had struck a US$72 billion deal with the legacy studio. This is a step to which even US President Donald Trump is objecting.
Late last month, Paramount announced an “irrevocable personal guarantee” of $40.4 billion in equity financing for the company’s offering from Oracle founder Larry Ellison – father of Paramount CEO David Ellison. If the deal is blocked by regulators, Paramount has increased its promised payout to shareholders to $5.8 billion, matching the amount Netflix already has on the table.
The battle for Warners and the value of each offer becomes complicated because Netflix and Paramount want different things. Netflix’s proposed acquisition only includes Warner’s studios and streaming business, including its legacy TV and film production arms and platforms like HBO Max.
But Paramount wants the entire company – beyond the studios and streaming, to include networks like CNN and Discovery.
If Netflix is ​​successful, Warner’s news and cable operations would be moved into their own company as part of the previously announced separation.
A merger with any company would attract tremendous antitrust scrutiny. Due to its size and potential impact, it would almost certainly trigger a review by the US Justice Department, which could sue to block the transaction or request changes. Other countries and foreign regulators may also challenge the merger.
