Warner Bros Discovery has advised shareholders to reject Paramount Skydance’s $108.4bn (£80.75bn) takeover offer, backing instead its previously agreed $72bn deal with Netflix for its film and streaming businesses. The company said its board had unanimously concluded that the Netflix agreement offers better long-term value and fewer risks.
Board rejects Paramount bid
Paramount Skydance had described its proposal as “superior” to the Netflix deal. However, Warner Bros Discovery said its board reviewed the offer and found it posed “numerous and significant risks.” In a legal filing, the board also rejected claims that the Ellison family, one of the wealthiest families in the US, is financially supporting the bid.
Paramount is backed by the Ellison family, which has close ties to the US president. Warner Bros Discovery said those ties did not offset what it described as funding and execution concerns linked to the proposal.
Sale process and Netflix agreement
Warner Bros Discovery put itself up for sale in October after receiving “multiple” expressions of interest, including approaches from Paramount Skydance. On 5 December, the company announced it had agreed to sell its film and streaming businesses to Netflix.
The board said the Netflix offer is well financed and provides clearer long-term value for shareholders, reflecting the current balance of power in the entertainment industry. Netflix welcomed the recommendation. Co-chief executive Ted Sarandos said the merger agreement was “superior” and “in the best interest of stockholders.”
In a letter to shareholders, Netflix said its proposal carries a clearer funding structure and lower regulatory risk than the rival bid.
Differences between the two offers
The two proposals would lead to different outcomes for Warner Bros Discovery. Netflix plans to acquire the Warner Bros movie studio and the HBO streaming service. The deal would give Netflix access to Warner Bros’ content library and secure rights to films and shows for its subscribers. Netflix does not want Warner Bros Discovery’s pay-TV channels.
If the Netflix deal proceeds, Warner Bros Discovery would need to separate and sell its television networks, including CNN and TNT, into a different company before the transaction is completed.
Paramount Skydance’s offer covers Warner Bros Discovery in its entirety. That would include acquiring television networks that compete directly with Paramount’s own channels, such as CBS, MTV, and Showtime.
Regulatory considerations and next steps
Regulators could question whether a full takeover by Paramount would reduce consumer choice as ownership in the entertainment sector becomes more concentrated. Despite the board’s recommendation, Paramount could still return with a revised offer, leaving the future ownership of Warner Bros Discovery unresolved.
Featured image credits: Pixabay
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