Warner Bros. advises shareholders to reject an outside takeover bid Paramount Skydancestating that the competitive rate is from Netflix will be better for customers.
“Today the board of directors of Warner Bros. Discovery has sent a clear message to you, its shareholders,” the company said in a letter to shareholders. “The WBD Board urges you to reject Paramount Skydance's objectionable, defective and illusory tender offer.”
Paramount is hostile with his proposal last weekasking shareholders to walk away from the Netflix deal, which was approved by the Warner Bros. board of directors.
Paramount is offering $30 per share for Warner versus $27.75 for Netflix.
Warner Bros. merger with either company would change the landscape of Hollywood and face scrutiny from U.S. regulators as it impacts film production, consumer streaming platforms and, in Paramount's case, the news landscape.
Paramount's proposal is not off the table. While Wednesday's letter to shareholders means Paramount's offer is not an endorsement by the Warner Bros. board, shareholders could still decide to tender their shares in favor of Paramount's offer for the entire company, including cable stalwarts CNN and Discovery.
Unlike Paramount's proposal, Netflix offer does not include the purchase of Warner Bros.' cable business. The Netflix acquisition, if approved by regulators and shareholders, will be completed only after Warner completes the previously announced split of its cable operations.
Paramount said it made six different offers that Warner executives rejected before announcing the Netflix deal on Dec. 5. Only then did the company send its proposal directly to Warner shareholders.
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Critics of the Netflix deal say combining the major streaming company with Warner's HBO Max will give it overwhelming dominance in the market, while Paramount+'s streaming service is much smaller.
“This is something we have heard about for a long time, including when we entered the streaming business,” Netflix co-CEOs Greg Peters and Ted Sarandos said in a statement filed through Warner Bros. “Our position then and now is the same – we see this as a victory for the entertainment industry, not the end of it.”
The proposals from Netflix and Paramount have raised alarms about what they could mean for film and TV production. Although Netflix agreed to honor Paramount's contractual obligations for theatrical releases, critics pointed to its past business model and reliance on online releases. However, Paramount and Warner Bros. – two of the “big five” old studios remaining in Hollywood today.
Paramount's attempt to buy Warner's cable networks and news businesses would also bring CBS and CNN under one roof. In addition to further accelerating media consolidation, it could raise questions about changes in editorial control, as was seen at CBS News both in the lead-up to and after Skydance's $8 billion purchase of Paramount, which the company completed in August.
Paramount Skydance did not immediately respond to a request for comment from The Associated Press early Wednesday morning.
US President Donald Trump has already announced its future involvement in the deal, indicating that politics will play a role in regulatory approval.
Trump previously said the Netflix deal “could be a problem” due to potential over-control of the market. The Republican president also has a close relationship with billionaire Oracle founder Larry Ellison – the father of the Paramount CEO, whose family trust also strongly supports the company's bid to buy Warner.
Affinity Partners, an investment firm run by Trump's son-in-law Jared Kushnerpreviously said it would also invest in the Paramount deal. But on Tuesday the firm announced it was withdrawing from the tender.
Foreign sovereign wealth funds from Saudi Arabia, Abu Dhabi and Qatar are also backing Paramount's bid, providing billions of dollars.
Warner Bros. stated that, in their opinion, Netflix's offer is more solid.
“There are no contingencies, no foreign sovereign wealth funds, no pledge of shares or consumer loans,” the letter to investors said. “We are a massive company with a market capitalization of +$400 billion and a strong investment-grade balance sheet. As (Warner Bros.) stated, the (Paramount Skydance) offering is subject to 'numerous risks and uncertainties,' including (Paramount's) financial condition and creditworthiness.”
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