Warner Bros Rejects Paramount's $108 Billion Bid

Warner Bros. Discovery has officially rejected Paramount Skydance's $108 billion bid, opting to stick with its merger agreement with Netflix. The decision comes after a series of proposals from Paramount that Warner Bros. deemed inadequate and risky for its shareholders. Paramount’s $30-per-share offer was dismissed with concerns raised over financing and the backing of Oracle billionaire Larry Ellison’s trust, which Warner Bros. says lacks full transparency and guarantees.

Warner Bros. stated that Paramount’s offer, which includes backing from Ellison’s trust and a group of investors, “fails to address key concerns” raised in the company’s previous discussions with the bidder. Paramount, which had proposed a mix of equity and debt financing, is said to have left several key elements of the deal uncertain, including the assets of Ellison’s trust, which Warner Bros. claims could change at any time. The board also pointed out the risks surrounding Paramount’s relatively weak financial position, with a market capitalization of just $15 billion, compared to Netflix’s $400 billion valuation.

Despite Paramount’s promises of $41 billion in equity from the Ellison family and $54 billion in debt commitments, Warner Bros. is not convinced that the deal would be as secure as Netflix’s, which is fully backed by a company with an investment-grade balance sheet. The streaming giant’s $72 billion agreement to acquire Warner Bros.' film, television, and streaming businesses, including the HBO Max service, has been deemed far more solid and less risky.

Paramount’s bid faced further scrutiny after questions about the involvement of Middle Eastern sovereign funds and Chinese tech giant Tencent. In fact, Paramount had to remove Tencent from the bid following concerns raised about its financial stability. Warner Bros. also expressed doubts about the long-term viability of Paramount’s financing structure, which could push the company into high debt ratios and result in further financial strain.

While Paramount had hoped to persuade Warner Bros. shareholders to accept the deal, its chances seem slim given the overwhelming backing Warner Bros. has for its Netflix deal, which has already been approved by the company’s board. Paramount’s legal and financial advisors have yet to respond to Warner Bros.’s dismissal, and the media giant now faces the possibility of increasing its offer to sway shareholders.

In response to the rejection, Netflix has reaffirmed its commitment to the deal, with co-CEO Ted Sarandos emphasizing that the acquisition "is the right deal, with the right partner, at the right time." He also assured that Netflix would continue to release Warner Bros. films in theaters, preserving a traditional film window for audiences.

With Warner Bros. solidly behind its Netflix merger, the question remains whether Paramount will raise its bid or pull back entirely. If the bidding war escalates, it could spark months of negotiation and regulatory scrutiny, akin to previous corporate battles like Disney’s acquisition of Fox.

For now, Warner Bros. CEO David Zaslav and his team are focused on completing the Netflix transaction, with regulatory reviews already underway. The company’s board remains firm in its belief that the Netflix deal offers the best value for its shareholders, despite the high stakes of the ongoing bidding war.