Warner Bros. Discovery Board Votes Unanimously to Reject Paramount’s Hostile Bid
Weeks following Paramount’s hostile takeover bid, the Warner Bros. Discovery (WBD) board has unanimously voted to reject the 108.4 billion offer and asked shareholders to do the same.
Written by Jackie Leavitt (Editor at Large)
Reviewed by Aleksander Hougen (Chief Editor)
Last Updated:
In a WBD shareholder presentation about the deal, the company argued why the Netflix offer was more favorable for shareholders, citing “substantial risks” with Paramount’s hostile takeover bid and describing it as “illusionary as it cannot be completed before it is currently scheduled to expire.”
In a WBD press release about the board recommendation to shareholders, Samuel A. Di Piazza, Jr., Chair of the Warner Bros. Discovery Board of Directors, stated:
“Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed. Our binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount’s offer would impose on our shareholders.”
Netflix has approximately $400 billion market capitalization, including A/A3 credit rating and an estimated $12 billion in free cash flow. Meanwhile, Paramount has BB+/BBB- credit rating, negative free cash flow, and the deal would result in substantial debt — although Larry Ellison pledged an irrevocable personal guarantee of $40.4 billion for equity financing and damages.
Other drawbacks to the Paramount offer include that it could be terminated or amended at any time by Paramount; that the deal would prevent WBD from completing its planned corporate separation; and that shareholders would not receive cash for 12-18 months and shares would be nontradeable during that time. Additionally, if WBD took Paramount’s bid, it would owe Netflix a $2.8 billion termination fee.
However, Pentwater Capital Management, a major WBD shareholder, criticized the board for not negotiating more with Paramount and threatened to vote against the merger.
Netflix published a press release celebrating the WBD board recommendation, and stated it was engaging with the U.S. Department of Justice and the European Commission to move the deal forward.
Under Paramount’s current offer, Warner Bros. shareholders have until Jan. 21 to tender shares.
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