Warner Bros Discovery Urges Shareholders to Reject Paramount’s Offer as the Battle Continues

Warner Bros. Discovery (WBD) has officially rejected Paramount’s buyout proposal, labeling it as “illusory.” WBD argues that their existing plan to sell significant assets to Netflix yields better value for shareholders. On Wednesday morning, WBD filed a formal response to Paramount’s hostile takeover bid, which was initiated last week.

Key Details of the Rejection

The board of WBD expressed in a letter to shareholders that Paramount’s offer could bring “inadequate value” while imposing substantial risks and costs. The ultimate decision rests with shareholders, and some have indicated they may disregard WBD’s recommendations, opting instead to sell their shares to Paramount at $30 each.

Concerns Surrounding Paramount’s Financing

Paramount claims its bid provides “more value and certainty,” but WBD executives have voiced doubts about its reliability. Paramount’s financing is heavily backed by royal families from Saudi Arabia, Qatar, and Abu Dhabi. Although Paramount asserts it has “air-tight financing,” WBD questions why these financial backers have not contributed more personal funds.

• David Ellison and Larry Ellison, paramount shareholders, recently took control of Paramount after a contentious merger.
• Larry Ellison is ranked as the third richest person globally, with a net worth of roughly $240 billion.

Moreover, a letter from WBD challenges Paramount’s assertion of having complete backing from the Ellison family. Recently, U.S. lawmakers expressed unease over the foreign financing structure, citing potential national security risks. Representatives Sam Liccardo and Ayanna Pressley stated that the deal could allow foreign financiers significant influence over an American media giant.

Market Reactions and Future Steps

Paramount has indicated that the royal families involved would relinquish any voting rights if the transaction is completed. However, this arrangement raises further inquiries about their motivation. On Tuesday, Jared Kushner’s private equity fund, Affinity Partners, withdrew from the bidding process, despite acknowledging the strategic merit of Paramount’s proposal.

The corporate conflict is expected to persist for several months. Paramount’s current offer to acquire shares is set to expire on January 8 but may be extended. Analysts suggest that Paramount could increase its bid, pursue legal action, or take alternative routes to secure the acquisition.

Netflix’s Strategic Plans

Amidst this ongoing struggle, Netflix is proceeding with its intention to acquire significant assets from WBD, including the Warner Bros. studio and HBO Max. Co-CEOs Greg Peters and Ted Sarandos conveyed confidence in their existing deal, emphasizing its benefits for shareholders, consumers, and job security in the industry.

Under the current strategy, WBD plans to split into two publicly traded entities by next summer. Netflix is expected to pursue regulatory approval for the purchase of the Warner Bros. segment, while the other segment will include CNN and additional channels.

Former President Donald Trump has publicly declared his intent to participate in regulatory reviews, voicing a preference for Paramount’s offer. His recent comments reflect criticism of CNN’s management, underscoring his support for a transition in ownership.