Warner Bros. Discovery (WBD) finds itself at the center of a rare Hollywood bidding war, with its board recommending shareholders reject a hostile takeover offer from Paramount Global while maintaining support for the original Netflix (NFLX) acquisition plan. This battle will determine the fate of iconic assets including HBO and CNN.
In a Wednesday letter to shareholders, WBD's board explicitly labeled Paramount's all-cash $30-per-share offer as "inferior" and "inadequate." Paramount's proposal covers all WBD assets including cable networks, whereas Netflix's deal focuses solely on streaming and studio operations. Under the Netflix agreement, WBD shareholders would receive $27.75 per share in cash plus Netflix stock, along with equity in the spun-off cable networks business.
The board raised serious concerns about Paramount's financing security, noting that software billionaire Larry Ellison family's $40.7 billion equity commitment is backed by "an opaque and revocable trust," with documentation containing "loopholes and limitations that create risks for shareholders and the company." The Paramount deal would also require WBD to pay Netflix a $2.8 billion breakup fee.
This bidding war highlights the intensity of Hollywood consolidation in the streaming era while sparking regulatory and industry concerns about further concentration. Regardless of the outcome, any deal would face months of regulatory scrutiny.
Paramount Goes Direct to Shareholders After WBD's board agreed to the Netflix deal, Paramount launched a direct appeal to WBD shareholders. Controlled by Larry Ellison and his son David Ellison, Paramount is competing against Netflix—the world's most valuable entertainment company—for one of Hollywood's most historic studios and crown jewel HBO.
Regulatory filings show Paramount CEO David Ellison first proposed the acquisition during a September 14 meeting with WBD CEO David Zaslav. Despite the board rejecting initial offers, Ellison submitted two improved bids within a month, sparking interest from Netflix, Comcast, and other unnamed parties.
Both Paramount and Netflix executives claim they would be the ideal buyer to leverage WBD's valuable content library for their respective streaming services.
Board Questions Financing Reliability WBD's board raised multiple concerns about Paramount's offer, primarily focusing on financing uncertainty and Paramount's ability to terminate the deal at will. The board stated the Ellison family failed to adequately support its $40.7 billion equity commitment, which is backed by "an unknown and opaque revocable trust."
The letter noted Paramount's documentation contains "loopholes, defects and limitations," while the proposal imposes multiple restrictions on WBD including debt refinancing constraints.
Paramount's total valuation of WBD including debt stands at $108.4 billion. Netflix's offer values the targeted assets at approximately $82.7 billion, with WBD investors additionally benefiting from the cable networks spinoff. Some shareholders including fund manager Mario Gabelli support a competitive auction, believing both Paramount and Netflix might raise their bids.
Bidding Process Controversy David Ellison criticized the bidding process, accusing WBD of unfairly favoring Netflix. WBD characterized the Ellison family as aggressive and disorganized, citing late submissions, unresolved concerns, and a strategy alternating between threats and courtship of management.
WBD stated it repeatedly raised concerns about insufficient evidence of the Ellison family's ability to fund the deal, whereas Netflix addressed all board concerns. The board unanimously recommended the Netflix deal, calling its terms "superior" while labeling Paramount's offer as providing "inadequate value with significant risks and costs." The board added that Paramount's proposed cost cuts would "leave Hollywood weaker, not stronger."
Funding Sources and Regulatory Hurdles Ellison's latest offer includes $11.8 billion from his family, $24 billion from three Middle Eastern sovereign wealth funds, and additional financing from RedBird Capital Partners. Affinity Partners, founded by former President Trump's son-in-law Jared Kushner, withdrew from the bidding process on Tuesday.
Both acquisition proposals have raised Hollywood concerns about industry consolidation and drawn criticism across political spectrums. Either deal would trigger months-long regulatory reviews. While Paramount insists its proposal has better regulatory approval prospects, WBD maintains that Netflix and Paramount face similar regulatory hurdles.
Comments