- Warner Brothers Discovery has just rejected Paramount’s takeover offer
- WBD board favors Netflix deal
- Don’t expect a deal to close anytime soon
Last week, it looked like Paramount might step in to steal Warner Bros. Discovery to Netflix with a hostile takeover bid that dwarfed the streaming giant’s offer, but now it appears WBD is sticking with its Stranger Things paramour.
Indeed, WBD’s board of directors officially rejected David Ellison’s Paramount offer, calling it “inadequate, with significant risks and costs imposed on our shareholders” (via The Hollywood Reporter).
Their complaints focused on two key issues.
The first is that WBD doubts that Larry Ellison – David Ellison’s father, who is helping finance the Paramount deal – can provide the full support that Paramount’s offer claims it can. Essentially, Larry Ellison is proposing a trust with assets and liabilities as a guarantor for the Paramount deal, but because the deal does not disclose what those assets are and because the assets within the trust can be moved or changed, WBD is not convinced that this can serve as a reliable safety net.
The second concerns the involvement of Middle Eastern sovereign funds. While the Ellisons’ involvement would undoubtedly help grease the regulatory wheels — since Larry is a close ally of President Donald Trump — the fear is that money from Saudi Arabia, Abu Dhabi and Qatar will only undo that political goodwill, as U.S. lawmakers may not want these foreign powers to be so heavily involved in such a major entertainment provider.
It probably doesn’t help that Jared Kushner’s investment fund (Kushner is Trump’s son-in-law) also withdrew its financial support in the Paramount deal.
WBD added that in addition to this financial and regulatory uncertainty, it does not believe the Paramount deal is materially better than Netflix’s offer. He sees it as more risk with no gain.
Netflix also sent a letter to WBD shareholders explaining why its offer is “superior on several fronts.”
Far from the climax
Even though this seems like the end of the story, it’s definitely not.
To begin with, WBD’s board of directors does not have the final say on Paramount’s offer: its shareholders do. Even though WBD’s board said in a letter to shareholders that the Netflix deal was superior, shareholders could still decide to sell their stake to Paramount.
Even if they agree with the board’s assessment, Paramount can’t back down.
Reports suggest that David Ellison texted WBD CEO David Zaslav to tell him that Paramount might be willing to exceed $30 per share, saying, “Please note that we did not include ‘best and last’ in our offer.”
Likewise, if the Paramount consortium comes back with a better offer, Netflix could respond with an even bigger buyout deal. The declines in Netflix and Paramount’s stock prices suggest that markets are predicting a bidding war.
It’s also worth noting that while the focus is on the U.S. government’s thoughts on the deals — especially given Trump’s close personal ties to the Ellisons and his unprecedented pledge to want to be directly involved in the decision-making process regarding the deal — the U.S. likely won’t be the only government weighing in. The EU will also weigh in, and its commission does not appear to have the same personal affinity for the Ellisons.
There’s still time to do more in 2025, but I think the biggest developments won’t happen until 2026, which will give us plenty of time to watch how this drama unfolds. Personally, I can’t wait to see Netflix’s dramatization of all this.
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