Warner Bros. Discovery again Paramount Skydance's acquisition bid rejected, officially inviting its shareholders not to accept the revised $108,4 billion proposal. The board of directors unanimously deemed the transaction too risky on the financial level and clearly lower compared to the agreement already signed with Netflix, which continues to be considered the most solid and reliable partner.
The rejection comes despite the direct involvement of Larry Ellison, the billionaire co-founder of Oracle and controlling shareholder of Paramount, who had promised to put on the table 40 billion dollars in personal guarantees to support the acquisition. But why does Warner Bros. continue to say no to Paramount?
Warner Bros. and the agreement with Netflix
To fully understand the story, we need to go back to December 5th, when Warner Bros. announced a binding agreement with Netflix. The agreement includes the streaming giant's acquisition of the group's film and television assets, including studios and catalog, for $ 82,7 billion, following a corporate reorganization that will separate these businesses from the cable networks. According to the Warner Bros. board, this transaction offers greater execution certainty, a more robust financial profile, and lower risk for shareholders, thus representing the most advantageous choice for the group's future.
The Paramount offer and the debt issue
Paramount Skydance attempted to turn the situation around by proposing the acquisition of the entire Warner Bros. group, including cable networks such as CNN, Discovery channels and European free-to-air activities. The revised offer amounts to $ 108,4 billion, with a counterpart in cash of $30 per share.
The problem, according to Warner Bros, is how this operation would be fundedParamount, which has a market capitalization of about $14 billion, is proposing to finance the deal. with $40 billion in equity capital, personally guaranteed by Ellison, and $54 billion in debt.
Once the acquisition is completed, Warner Bros. Discovery would be left withon $87 billion in debt, setting up what the board calls “effectively the largest leveraged buyout transaction in history.”
Warner Bros.: Why the Board Says No to Paramount
In a letter In a statement to shareholders, the board of directors explained that Paramount's offer did not meet the requirements of a "superior proposal," as required by the existing agreements. The chairman of the board, Samuel Di Piazza Jr, stressed that the offer provides a insufficient value and relies on an extraordinary amount of debt financing, increasing the risk of the deal failing and offering poor protections to shareholders. Furthermore, Paramount's plan would further worsen the group's credit rating – already classified as "junk" by S&P Global – and put cash flows under pressure, This makes the closing of the deal uncertain. Netflix, on the other hand, has a market capitalization of around $400 billion, an investment-grade rating, and a financial structure considered more solid and reliable.
Warner Bros. on the high costs of breaking the deal with Netflix
A further critical element concerns the exit costs from the agreement with Netflix. In the event of a withdrawal, Warner Bros. would have to pay the streaming group a penalty of 2,8 billion of dollars, over to 1,5 billion in commissions to financiers and approximately 350 million in additional financial costs, for a total of approximately $4,7 billion, or $1,79 per share.
Beyond the economic aspects, there are also strategic implications. Warner Bros. plans to separate its cable networks into a new society listed, Discovery Global, but according to the board, the Paramount operation would impose operational constraints that would block this project, limiting the group's flexibility and competitiveness.
The board also noted that Paramount would offer insufficient compensation if the deal were to fail, exposing Warner Bros. to losses and operating restrictions. In this context, the board accused Paramount of having "repeatedly failed to present the best proposal to shareholders," despite clear indications of the offer's shortcomings and possible solutions.
Wall Street: Warner and Paramount Weak, Netflix Soars
In mid-December, Netflix co-CEO, Ted Sarandos, called the transaction with Warner Bros. "in the best interests of shareholders," while Paramount has not yet released official comments on the board's latest position. Wall Street, the actions Warner Bros. shares fell 0,62% to $24,20, Paramount posted a slight increase of 0,12%, while Netflix rose significantly by 1,89%.
For now, the line is clear: Netflix moves forward, Paramount is once again rejected. However, Warner Bros.' refusal doesn't definitively end the game: Paramount could return with a new offer or let the final decision you go directly to the shareholders, keeping open one of the most followed and significant battles in the media industry.
