The board of Warner Bros Discovery is leaning towards rejecting a revised $108.4 billion hostile takeover bid from Paramount Skydance, even with a personal financial guarantee from billionaire Larry Ellison backing the offer. According to a source with knowledge of the internal discussions, the board has not made a final decision but is expected to convene next week to formalise its stance.
Ellison's Guarantee Fails to Sway Warner Bros Board
The amended bid, which values the historic Hollywood studio at a staggering $108.4 billion, includes a crucial personal guarantee from Oracle co-founder Larry Ellison. Ellison, whose son David is the Chairman and CEO of Paramount, personally guaranteed the equity supporting the offer. This move was intended to address persistent concerns about financing certainty that had plagued Paramount's earlier proposal.
Despite this significant backing, the Warner Bros board remains unconvinced. The source indicated the revised terms are not "sufficient" to change their trajectory. Notably, the offer did not increase its $30-per-share all-cash price. Paramount did, however, raise its regulatory reverse termination fee to match Netflix's offer and extended its tender offer deadline.
Netflix's Rival Deal Presents Clearer Path
This anticipated rejection keeps Warner Bros on course to pursue an alternative cash-and-stock agreement with Netflix, valued at $82.7 billion. Financial analysts have pointed out that while Netflix's headline number is lower, its proposal comes with a more transparent financing structure and presents fewer execution risks, making it a more attractive option for the Warner Bros board.
Choosing the Netflix deal is not without cost. Under its terms, Warner Bros would face a substantial $2.8 billion breakup fee if it walks away. Harris Oakmark, a major investor holding 96 million Warner Bros shares, stated the sweetened Paramount bid was not enough to cover this potential penalty, calling it insufficient.
Regulatory and Market Battles Intensify
The high-stakes battle highlights the intense consolidation fever sweeping the media industry. Paramount has argued that its bid would face fewer regulatory obstacles compared to a Netflix deal. A merger between Paramount and Warner Bros would create an entity larger than the current industry leader, Disney, and combine two major television operations.
Conversely, Paramount contends its all-cash offer is more stable and market-proof than Netflix's stock-based proposal, whose value fluctuates with Netflix's share price. The deal has attracted political attention, with lawmakers from both parties expressing concerns about media consolidation. Former U.S. President Donald Trump has also indicated he plans to weigh in on the landmark acquisition.
The Warner Bros board had previously advised shareholders to reject Paramount's initial offer, citing worries over financing and the lack of a full guarantee from the Ellison family. The latest personal guarantee, it seems, has not fully allayed those fears, setting the stage for a potential blockbuster alliance with Netflix instead.
