Warner Bros. Discovery’s (WBD) board has rejected Paramount’s updated offer and stated that it was “inferior” to the $72-billion deal that Netflix had previously announced to purchase its studio and streaming division.
Why WBD turned Paramount’s bid down
Despite Paramount’s increased per-share price included in its revised offer, WBD’s board unanimously rejected the former’s $108.4-billion hostile takeover offer and reiterated its commitment to Netflix’s $82.7 billion deal.
The takeover attempt by Paramount was deemed “inadequate” and a “risk” to the company by WBD because it relied on an “extraordinary amount of incremental debt.”
According to the board, leaving Netflix in order to accept Paramount’s offer would result in immediate costs of $4.7 billion, which would include $350 million in additional interest, a $1.5-billion debt exchange penalty, and a $2.8-billion Netflix termination fee.
In the event that the merger fails, Paramount’s $5.8-billion reverse termination fee would only provide $1.1 billion in shareholder protection after deducting these switching expenses, which the board said would not be sufficient to cover any possible harm to the business during the 18-month operating limits.
The board also pointed out that Paramount needs $94.65 billion in debt and equity financing despite having a $14-billion market capitalisation.
Given Paramount’s reliance on several lenders to supply $54 billion in committed debt at closing, this poses a significant execution risk.
WBD compared this to Netflix’s predicted $12 billion in free cash flow for 2026 along with $400 billion market capitalisation and investment-grade credit rating.
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What’s in store for the Netflix-Warner Bros. Discovery deal
According to Netflix, the agreement will “offer more choice, more opportunities, and more value.”
“The WBD Board remains fully supportive of and continues to recommend Netflix’s merger agreement, recognising it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry,” Netflix co-chief executive officers (CEO) Ted Sarandos and Greg Peters said in the statement.
Warner will have its cable networks, including CNN, TNT, and Discovery Channel, into a new separate business called Discovery Global, which is scheduled to start in mid-2026, and sell its studio and streaming operations, including Warner Bros Pictures, HBO, and Max, as part of the terms of the Netflix acquisition.
“Today’s announcement combines two of the greatest storytelling companies in the world to bring to even more people the entertainment they love to watch the most,” President and CEO of Warner Bros. Discovery David Zaslav stated.
“For more than a century, Warner Bros. has thrilled audiences, captured the world’s attention, and shaped our culture.”
“By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come.”
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