Additional Coverage:
- Warner Bros. rejects Paramount’s hostile bid, accuses Ellison family of failing to put money into the deal (latimes.com)
Warner Bros. Discovery Rejects Paramount’s Hostile Takeover Bid, Citing Shaky Financing
In a dramatic turn in the ongoing battle for Hollywood’s iconic studios, Warner Bros. Discovery (WBD) has decisively rejected Paramount’s hostile $108-billion takeover offer. WBD’s board unanimously concluded that Paramount’s proposal carries significant financial risks, primarily due to what they describe as a lack of firm financial commitment from the Larry Ellison family, who are backing Paramount’s bid.
WBD’s board, in a letter to shareholders filed with the Securities & Exchange Commission on Wednesday, accused Paramount of “consistently misled[ing] WBD shareholders that its proposed transaction has a ‘full backstop’ from the Ellison family.” The board emphatically stated, “It does not, and never has.”
This rejection comes after WBD had previously approved an $82.7-billion deal with Netflix for its film and television studios, HBO, and HBO Max. WBD’s board reaffirmed its support for the Netflix proposal, urging investors not to tender their shares to Paramount.
Paramount Disputes Claims, Vows to Continue Pursuit
Paramount, however, quickly disputed WBD’s assertions. David Ellison, Chairman and CEO of Paramount, reaffirmed his company’s commitment to the deal, stating, “We remain committed to bringing together two iconic Hollywood studios to create a unique global entertainment leader.” Ellison indicated Paramount would continue to appeal directly to WBD shareholders, insisting the transaction is in their best interest.
Paramount’s offer values WBD at $30 per share, totaling $78 billion for the company, plus the absorption of WBD’s $30 billion debt.
Concerns Over Financing Guarantees
WBD’s board expressed deep concerns regarding the perceived instability of Paramount’s financing, stating that the Ellison family’s assurances were “far from ironclad.” They highlighted “gaps, loopholes and limitations” in Paramount’s proposal, including a clause reserving the right to amend the offer, which WBD fears could leave shareholders vulnerable.
In contrast, Netflix’s Co-Chief Executives Ted Sarandos and Greg Peters emphasized the “clean and certain” structure of their deal, backed by “committed debt financing from leading institutions” and a strong balance sheet.
Paramount, however, maintains that its financing is solid, pointing to a “well-capitalized trust (in existence for approximately 40 years) of one of the most well-known founders and entrepreneurs in the world, Larry Ellison.” They also criticized WBD’s “absolute resistance…to even engage in a single negotiating session.”
A High-Stakes Hollywood Drama
This ongoing saga has been likened to a real-life episode of HBO’s “Succession” by industry analysts. Mike Proulx, a Forrester research analyst, noted, “The ultimate decision still rests with WBD’s shareholders and that vote is months away. What’s unfolding now feels like a real-life, far more consequential episode of HBO’s ‘Succession.'”
The financing for Paramount’s bid includes $24 billion from sovereign wealth funds and $11.8 billion from the Ellison family. Notably, Jared Kushner’s Affinity Partners private equity firm recently withdrew from Paramount’s financing group. Paramount’s bid also relies on over $60 billion in debt financing.
Regulatory Hurdles and Cost-Cutting Concerns
Both parties are also navigating potential regulatory approvals. While Paramount has suggested its deal might face fewer antitrust challenges given past relationships with the Trump administration, WBD’s board countered that there is “no material difference in regulatory risk” between the two offers. Netflix has agreed to a substantial $5.8 billion termination fee if its deal fails to clear regulatory hurdles, compared to Paramount’s $5 billion offer.
WBD’s board also raised concerns about Paramount’s ambitious cost-cutting targets, which include shaving $9 billion from the combined companies. WBD fears these cuts “would make Hollywood weaker, not stronger.”
The ultimate decision now rests with WBD shareholders, who will have to weigh the competing offers and the significant financial and strategic implications of each.