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Warner Bros Board Rejects Latest Paramount Offer; Netflix Responds

Warner Bros. Discovery's board has voted unanimously to reject Paramount Skydance's latest bid offer; Netflix responds to the decision.

Just before the end of the year, news reports hit that Warner Bros Discovery's (WBD) board was set to Paramount Skydance's revised offer and recommend to its shareholders that the announced deal with Netflix should move forward. That became official on Wednesday, with the board announcing its official rejection of the offer in a letter to its shareholders and on WBD's corporate website. "The Board unanimously determined that the Paramount's latest offer remains inferior to our merger agreement with Netflix across multiple key areas," said Samuel A. Di Piazza, Jr., Chair of the Warner Bros. Discovery Board of Directors. "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."

In the letter to shareholders (available here), the board offered a number of bullet points to explain why Paramount's sixth offer was rejected, with specific details to help make their case:

PSKY Offer's Insufficient Value: "PSKY's offer is inferior given significant costs, risks and uncertainties as compared to the Netflix merger."

Lack of Certainty in PSKY's Ability to Close the Transaction: "The extraordinary amount of debt financing, as well as other terms of the PSKY offer, heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger."

Consequences for WBD Shareholders Should PSKY Fail to Close the Transaction: "If PSKY fails to close its offer, WBD shareholders would incur significant costs and potentially considerable value destruction."

The PSKY Offer Is Not Superior, or Even Comparable, to the Netflix Merger: "PSKY has repeatedly failed to submit the best proposal for WBD shareholders despite clear direction from WBD on both the deficiencies and potential solutions."

"The WBD Board remains fully supportive of and continues to recommend Netflix's merger agreement, recognizing it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry," shared co-CEOs Ted Sarandos and Greg Peters regarding the decision. "Netflix and Warner Bros. will bring together highly complementary strengths and a shared passion for storytelling. By joining forces, we will offer audiences even more of the series and films they love—at home and in theaters—expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry."

Although that's unlikely to deter Paramount Skydance from further pursuing WBD, it will be interesting to see if Netflix returns to the table with a revised offer or takes a "wait & see" approach.

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