Warner Bros Discovery has turned down Paramount Skydance’s most recent hostile takeover proposal valued at $30 per share, though the entertainment giant is allowing the competing studio one week to develop an enhanced bid for the company that owns HBO Max and the “Harry Potter” properties.
According to Warner Bros’ announcement, Paramount has informally suggested an increased offer of $31 per share, which appears to have caught the board’s attention enough to open limited discussions.
The competing studio now faces a February 23 deadline to present what Warner Bros is calling a “best and final offer,” which Netflix would have the right to match according to existing merger terms, the company stated Tuesday.
In a letter delivered Tuesday to Paramount’s board, Warner Bros Chairman Samuel DiPiazza Jr. and CEO David Zaslav made their position clear: “To be clear, our Board has not determined that your proposal is reasonably likely to result in a transaction that is superior to the Netflix merger. We continue to recommend and remain fully committed to our transaction with Netflix.”
Warner Bros revealed that an unnamed Paramount financial representative indicated their bid would increase to $31 per share if negotiations began, with potential for even higher amounts. The company now anticipates any final proposal will exceed that figure.
The numbers show a significant gap between offers: Paramount’s current proposal totals $108.4 billion for the entire company, while Netflix’s bid reaches $82.7 billion specifically for Warner Bros’ studio and streaming operations.
Despite repeatedly declining Paramount’s attempts to purchase the full company, Warner Bros continues advancing toward a shareholder decision on Netflix’s $27.75 per share offer for its entertainment and streaming divisions. The Netflix merger vote is scheduled for March 20 and would occur following Warner Bros’ plan to separate its Discovery Global cable networks, including CNN, TLC, Food Network and HGTV, into an independent publicly traded entity.
Warner Bros projects the Discovery Global spinoff could generate between $1.33 and $6.86 per share for investors.
The entertainment company’s willingness to consider Paramount’s approach, which required special permission from Netflix, represents a notable change in strategy.
Paramount had previously criticized the board for failing to “meaningfully engage” with six separate proposals submitted during the 12 weeks before Warner Bros announced its Netflix agreement on December 5. A public hostile takeover attempt launched shortly after was also rejected that same month.
An updated Paramount proposal featuring a personal $40 billion equity guarantee from Oracle founder Larry Ellison, whose son David Ellison leads Paramount as CEO, was similarly declined in early January.
This shift toward rival bidder discussions coincides with growing pressure from activist investor Ancora Holdings, which has accumulated a position in Warner Bros and intends to oppose the Netflix deal.
Paramount is simultaneously working to place representatives on Warner Bros’ board, with Pentwater Capital Management CEO Matt Halbower emerging as a potential candidate, according to Halbower’s statements last week. Pentwater, holding approximately 50 million Warner Bros shares, supports Paramount’s acquisition effort.
“Every substantive complaint that the Warner Bros board had with Paramount’s previous offer has been addressed,” Halbower explained in a recent interview.
Warner Bros’ board obtained special Netflix approval to engage with Paramount by invoking a merger agreement provision allowing rival bidder discussions when the board believes an offer might prove superior, creating a legal pathway for limited negotiations despite existing restrictions.
Netflix responded with a statement emphasizing the deal’s progress, noting the upcoming shareholder vote.
“While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” Netflix declared.
Last week, Paramount attempted to attract Warner Bros shareholders by improving its previous proposal without increasing the overall $30 per share price. The revised approach includes additional cash payments for each quarter the deal remains incomplete beyond this year and coverage of the $2.8 billion termination fee Warner Bros would owe Netflix if it abandoned their agreement.
However, Warner Bros indicated the modified Paramount proposal still doesn’t meet their standards for a superior offer.
Several significant concerns remain unaddressed in Paramount’s bid, including responsibility for a potential $1.5 billion junior lien financing fee, contingency plans if debt financing fails, and questions about the reliability of equity funding backed by lead sponsor Larry Ellison, according to the Warner board’s correspondence.
The letter acknowledged that while Paramount has dismissed financing concerns as “not serious” given their “lead equity sponsor’s personal wealth and lending banks’ credibility,” current draft agreements stipulate that additional equity funding must be secured if debt financing becomes unavailable to ensure deal completion.
Ancora, whose stake approaches $200 million in value, argued last week that Warner Bros’ board failed to properly consider Paramount Skydance’s rival proposal for the complete company, including cable properties like CNN and TNT.
