Warner Bros. Discovery officially turned down Paramount’s hostile bid, advising stockholders to do the same.
But the contest is far from over. Let’s examine what just occurred and what to anticipate next.
So, what just happened?
Early Wednesday morning, Warner Bros. Discovery, CNN’s parent company, issued a letter to shareholders and an SEC filing, formally rejecting Paramount’s latest all-company proposal, labeling the hostile takeover attempt as “illusory.”
According to the board, the existing agreement to sell Warner’s studios and streaming assets to Netflix remains advantageous for WBD shareholders.
Why did WBD decline Paramount?
It primarily revolves around finances: the WBD board stated that the Paramount deal “delivers insufficient value and imposes numerous significant risks and expenses on WBD.”
However, WBD also deemed Paramount’s offer too risky. The board wrote that Paramount “repeatedly misled” WBD shareholders by claiming its all-cash, $30 per share proposal was “backed” by Paramount CEO David Ellison and his father, Larry Ellison, the Oracle co-founder with an estimated worth of $240 billion.
Meanwhile, in the background, lawmakers voiced national security concerns regarding Paramount’s use of funding from Middle Eastern partners.
What does Paramount say?
The Ellisons maintain they fully support the bid—guaranteeing funding if partners withdraw. But the WBD letter refutes this assertion: “This is not the case and never has been.”
Last week, Paramount spoke of “hopeless funding” and dismissed any counter-offers as “absurd.”
In its regulatory disclosures, Paramount claimed that sovereign wealth funds controlled by Saudi Arabia, Qatar, and the UAE would have no governing say over WBD if the transaction were finalized. Still, the involvement of the royal families only amplified scrutiny on Paramount’s proposition.
What does Paramount do next?
Paramount now has the chance to return with a higher, more firmly backstopped offer to WBD. However, the company’s initial statement after WBD’s rejection “affirms commitment” to its “superior” $30-per-share proposal.
That posturing suggests the Ellisons will push forward by convincing WBD shareholders to tender their shares into Paramount’s current offer rather than accept Netflix’s offer for the streaming and studio assets.
This could turn into a long, drawn-out battle to win over shareholders. WBD board chair Sam DiPiazza told CNBC on Wednesday morning that the shareholder vote won’t happen until the spring or “early summer.”
Does Netflix need to do anything?
In the short run, not much. Netflix has already entered into its agreement with Warner Bros., and now it must wait for WBD shareholders to vote on the matter.
But if Paramount comes back with a more lucrative offer and WBD accepts that new deal, Netflix would have an opportunity to counter. It would have to decide if WBD is still worth it at a higher price.
All the while, the streaming giant will need to remain disciplined, avoiding public missteps that could give Paramount (or future regulators) any openings, and reaffirming to WBD shareholders why their offer is the better deal.
What are the regulators doing?
WBD reported on Wednesday that it is cooperating with regulators who are reviewing the Netflix deal.
Meanwhile, Netflix has begun to soothe industry anxieties regarding the potential ownership of WBD’s vast studio and streaming assets, as well as the impact on theatrical film distribution.
On Tuesday, Sarandos unexpectedly appeared at Canal+’s content showcase in Paris, where he told attendees: “Our intentions, when we acquire Warner Bros., will be to continue releasing Warner Bros. studio films in cinemas with traditional windows.”
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