In a significant development within the global media landscape, Warner Bros. Discovery Inc. is preparing to turn down a revised acquisition proposal from rival Paramount Skydance Corp. for the second time. The board of Warner Bros. is expected to formally reject the offer in a meeting scheduled for next week, according to sources familiar with the matter.
Paramount's Persistent Pursuit and Revised Terms
The ongoing corporate tussle saw Paramount publicly launch a campaign to buy Warner Bros. with a cash bid of $30 per share on December 8. This move came just three days after Warner Bros. accepted a separate deal from streaming giant Netflix. Notably, Netflix's agreement is only for Warner Bros.' studio and streaming businesses, not the entire company.
Paramount, controlled by billionaire Larry Ellison and his son David, has since amended its offer twice. The most recent revision includes a personal guarantee from Larry Ellison to back $40.4 billion in equity financing and other commitments. The Ellisons, who took control of Paramount in August, view the acquisition of Warner Bros. as a way to rapidly build a larger media empire, gaining a legendary Hollywood studio and greater scale in the competitive streaming market.
Why Warner Bros. Prefers the Netflix Deal
Despite Paramount's efforts, the Warner Bros. board remains unconvinced. Key concerns highlighted by insiders include the fact that Paramount has not increased the financial terms of its initial offer, which was previously deemed inferior. Several major shareholders have also expressed expectations for a higher bid from Paramount.
The board has additional reservations. They are worried that a merger with Paramount would leave the combined entity heavily indebted and that Paramount has not guaranteed to cover the breakup fee Warner Bros. would owe Netflix for backing out of their deal. Furthermore, the proposed terms would require Warner Bros. to seek Ellison family approval for managing its debt, a condition viewed as unfavourable.
In public filings, Warner Bros. has stated that the Netflix offer is superior, citing Netflix's robust financial health as the most valuable company in Hollywood with a market value exceeding $400 billion. Warner Bros. has also expressed concerns that a Paramount deal would lead to deeper job cuts.
The Road Ahead for Media Consolidation
This potential rejection sets the stage for a pivotal week in media mergers. The Warner Bros. board's upcoming meeting will make the final determination, but all signs point towards a reaffirmation of the strategic partnership with Netflix. The outcome underscores the intense competition and high-stakes financial manoeuvring defining the future of entertainment, streaming, and content creation globally. The decision will significantly impact the balance of power among Hollywood's legacy studios and streaming titans.
