Warner Bros Discovery (WBD) has advised its shareholders to reject a $108.4 billion (£80.75 billion) takeover bid from Paramount Skydance.
The company's board stated that Paramount's offer presented "numerous and significant risks." Instead, WBD's board "unanimously" recommended a previously agreed $72 billion deal with Netflix for its film and streaming businesses, deeming it to be in the firm's best interests.
Background to the Offers
Warner Bros Discovery initiated a sale process in October following expressions of interest from multiple potential buyers, including Paramount Skydance.
On December 5, Warner Bros Discovery announced an agreement to sell its film and streaming operations to Netflix.
Reasons for Rejection and Recommendation
In a legal filing, WBD's board cited concerns regarding Paramount's offer, specifically rejecting assertions that the Ellison family was providing substantial financial support for the bid.
Conversely, the board described Netflix's offer as "well financed" and offering superior long-term value to shareholders. Netflix, through its co-chief executive Ted Sarandos, reiterated that its merger agreement was "superior" and in the "best interest of stockholders," emphasizing its clearer funding structure and reduced regulatory risks.
Differences Between Offers
Netflix's Proposal: Netflix intends to acquire Warner Bros' movie studio and its HBO streaming service, which includes access to Warner Bros' content library. This deal would exclude WBD's pay-TV channels. Consequently, Warner Bros would be required to divest its television networks, such as CNN and TNT, into a separate entity prior to the acquisition's completion.
Paramount's Proposal: Paramount sought to acquire Warner Bros in its entirety, which would involve obtaining ownership of networks that compete with its own channels, including CBS, MTV, and Showtime. Regulators could potentially scrutinize such an acquisition due to concerns about further consolidation within the entertainment industry and its impact on consumer choice.
Paramount retains the option to submit a revised offer, indicating that the acquisition process remains ongoing.