Warner Bros Discovery has urged its shareholders to reject an updated takeover proposal from Paramount Skydance, describing the offer as “inferior” and not in shareholders’ best interests.
This marks the second time in less than a month that the Warner Bros board has advised investors to turn down Paramount’s bid. In early December, the company announced it had agreed to sell its film and streaming businesses to Netflix in a deal valued at $72bn (£54bn).
In a letter to shareholders, Warner Bros said Paramount’s revised proposal failed to meet the standard of a “superior offer” and did not outweigh the certainty and value of the existing Netflix agreement.
Paramount has argued that its offer is better because it would acquire the entire Warner Bros business, including major television networks such as CNN, TNT, Discovery and free-to-air channels across Europe. By contrast, Netflix’s deal covers only Warner Bros’ film and streaming operations, following a planned split of the company into two divisions later this year.
However, Warner Bros board chair Samuel Di Piazza Jr said the board remained united in its support for the Netflix deal. He said Paramount’s proposal offered insufficient value and relied heavily on debt, creating serious risks that the transaction would fail to close.
“Our binding agreement with Netflix provides greater certainty and superior value, without exposing shareholders to the significant risks and costs associated with Paramount’s offer,” he said.
One major concern raised by the board is that accepting Paramount’s bid would require Warner Bros to pay Netflix a $2.8bn break-up fee to terminate the existing merger agreement.
The board also pointed to Paramount’s relatively small market valuation of about $14bn, noting that its proposal would require more than $94bn in combined debt and equity financing. Warner Bros said this level of borrowing significantly increased the risk of the deal collapsing.
Paramount initially offered more than $108bn for Warner Bros in December, but the board unanimously recommended shareholders reject the proposal. Although Paramount later amended its offer, Warner Bros said it still fell short and failed to address key concerns previously raised.
In a statement earlier this month, Netflix co-chief executive Ted Sarandos said the Netflix-Warner Bros agreement was firmly in the best interests of shareholders.
Paramount has been contacted for comment.
