Warner Bros. Discovery again rejected Paramount’s takeover offer and urged shareholders to stick with Netflix’s bid, the company said Wednesday.
Warner’s leadership said its board determined Paramount’s proposal is not in the best interests of Warner or its shareholders, and it reiterated its recommendation that investors support the Netflix deal.
Samuel Di Piazza Jr., the chair of Warner Bros. Discovery, said in a statement that “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed.” He said Warner’s agreement with Netflix “will offer superior value at greater levels of certainty.”
The rejection came “for a second time,” according to the Associated Press’s report, and the company’s position echoed an earlier push for shareholders to back the Netflix sale of Warner’s streaming and studio business. Warner has previously urged investors to support the Netflix transaction for $72 billion, the AP reported.
In its Wednesday communication to shareholders, Warner said it essentially considers the Paramount proposal to function as a leveraged buyout that includes significant debt. Warner also pointed to operating restrictions it said were imposed by Paramount’s offer and said those could “hamper WBD’s ability to perform” throughout any transaction.
The corporate standoff is also shaped by differences in deal scope. Netflix’s proposed acquisition would cover Warner’s studio and streaming business, including legacy television and movie production arms and platforms such as HBO Max, according to the AP report. Paramount, by contrast, wants the entire company, including networks such as CNN and Discovery.
The AP said that if Netflix is successful, Warner’s news and cable operations would be spun off into a separate company under a previously announced separation. Regardless of which buyer prevails, the AP report said a merger could take more than a year to close and is expected to face significant antitrust scrutiny, including review by the U.S. Justice Department that could lead to a lawsuit to block the transaction or demands for changes.
Both companies’ paths through regulators are also likely to attract attention from outside the courtroom. The AP said entertainment trade groups have continued to sound alarm about both deals, with Cinema United sending a statement to a Congressional antitrust subcommittee on Wednesday. Cinema United, which represents more than 60,000 movie screens worldwide, said it was “deeply concerned” that Netflix’s acquisition could harm both moviegoers and people who work in theaters, citing what it described as Netflix’s past reliance on its online platform.
Cinema United said its concerns were “no less serious” for Paramount’s bid, warning that further consolidation could result in job losses and less diversity in filmmaking, according to the AP.
Paramount’s hostile bid remains on the table. The AP said Warner shareholders currently have until Jan. 21 to “tender” their shares.
Late last month, Paramount announced an “irrevocable personal guarantee” from Oracle founder Larry Ellison, the father of Paramount CEO David Ellison, to back $40.4 billion in equity financing for the company’s offer. The AP also reported that Paramount increased its promised payout to $5.8 billion if regulators block the deal, describing it as matching Netflix’s breakup fee.