Warner Bros. Discovery Rejects Paramount’s Revised Offer
Warner Bros. Discovery has officially rejected Paramount’s revised acquisition offer, choosing instead to stay committed to its existing agreement with Netflix. Despite Paramount increasing its efforts and backing the deal with major financial assurances, WBD’s board has made it clear that it sees more risk than reward in the proposal.
The decision was confirmed through a formal letter released by the WBD board, stating that the revised offer still fails to meet the company’s expectations in terms of value, certainty, and shareholder protection.
What Paramount’s Revised Offer Included
Paramount, led by David Ellison, submitted an amended tender offer late last month in an attempt to persuade Warner Bros. Discovery to reconsider. The revised proposal kept the offer price unchanged at $30 per share, paid entirely in cash.
Larry Ellison’s Personal Financial Backstop
One of the biggest changes in the new offer was Larry Ellison’s personal commitment to fully backstop the deal. This meant that Ellison himself would guarantee the financing if other funding sources fell through, a move designed to address concerns about deal certainty.
Higher Termination Fee and Extended Deadline
Paramount also increased the termination fee to $5.8 billion, matching the breakup fee tied to WBD’s Netflix agreement. Additionally, the deadline for shareholders to tender their shares was extended to later in January, giving investors more time to consider the offer.
Despite these updates, WBD’s board concluded that the revisions did not meaningfully change the risk profile of the transaction.
Why Warner Bros. Discovery Said No
In its letter, the WBD board explained that the revised offer was still inadequate and potentially dangerous for shareholders.
Concerns Over Deal Certainty
According to the board, the biggest issue remains uncertainty around Paramount’s ability to complete the transaction. Even with Ellison’s backing, WBD believes the financing structure is too fragile and exposed to market volatility.
The board emphasized that changes in industry conditions, company performance, or financing markets could derail the deal at any point.
The Risk of a Record-Breaking Leveraged Buyout
Warner Bros. Discovery described Paramount’s proposal as potentially becoming the largest leveraged buyout in history. Such deals rely heavily on borrowed money, making them particularly vulnerable if conditions change.
The board pointed out that many large leveraged buyouts in the past have failed or been renegotiated, often leaving the target company and its shareholders exposed to losses and uncertainty.
Comparing the Paramount Offer to the Netflix Deal
WBD made it clear that it views the Netflix agreement as a safer and more conventional transaction compared to Paramount’s aggressive structure.
Why Netflix Feels More Secure
The Netflix deal includes a mix of cash, Netflix stock, and a future spinoff component involving Discovery Global. While more complex on the surface, WBD believes the structure offers greater certainty and lower execution risk.
In contrast, the Paramount offer relies heavily on debt financing and layered financial commitments that could unravel under pressure.
Termination Fees and Financial Reality
Although Paramount raised its termination fee to $5.8 billion, WBD argued that the real benefit to shareholders would be far smaller.
The Hidden Costs of Walking Away From Netflix
If Warner Bros. Discovery were to abandon the Netflix deal, it would be required to pay Netflix $2.8 billion in termination fees. Additional costs would include interest expenses on debt and a $1.5 billion penalty for failing to complete a required debt exchange.
After accounting for these costs, WBD estimates that Paramount’s termination fee would net shareholders only about $1.1 billion, far less than it appears on paper.
Legal Risks Add to WBD’s Concerns
Another major factor in the board’s decision was the perceived legal risk associated with Paramount.
Fear of Prolonged Legal Battles
WBD referenced reports suggesting that Paramount was prepared to take aggressive legal action if its offer was rejected. The board described Paramount as a litigious counterparty, raising concerns that any agreement could become mired in lawsuits.
From WBD’s perspective, the likelihood of legal disputes increases execution risk and could delay or derail the transaction altogether.
Paramount’s View: Why They Believe Their Offer Is Better
Despite the rejection, Paramount continues to stand by its proposal, arguing that an all-cash deal offers clearer value than the Netflix agreement.
David Ellison Defends the Bid
In a statement released with the revised offer, David Ellison said that Paramount’s $30 per share bid remains the superior option for maximizing shareholder value.
He emphasized Paramount’s commitment to long-term investment, increased content production, expanded theatrical releases, and greater consumer choice.
According to Ellison, the acquisition would strengthen Warner Bros. Discovery as a creative powerhouse and preserve its legacy as a major Hollywood studio.
Disagreement Over Discovery Global’s Valuation
A key point of disagreement between the two sides lies in how Discovery Global is valued.
Paramount’s Argument
Paramount has pointed to recent market performance of similar spinoffs, such as Comcast’s Versant, which saw its stock drop sharply after separating. This has led Paramount to argue that Discovery Global should be valued closer to $1 per share.
Warner Bros. Discovery Pushes Back
WBD strongly disagrees, stating that Discovery Global has greater scale, stronger profits, and a more diversified international presence compared to recent spinoffs.
The company believes its global footprint and established brands justify a higher valuation, estimated by others at $3 to $5 per share.
What This Means for Warner Bros. Discovery Shareholders
For now, Warner Bros. Discovery is firmly committed to moving forward with Netflix. The board has signaled that stability, certainty, and long-term value matter more than headline numbers.
Shareholders can expect continued focus on completing the Netflix transaction and executing the planned Discovery Global spinoff.
What Happens Next
While Paramount has not indicated whether it will submit another revised offer, the tone of WBD’s response suggests that further attempts would face an uphill battle.
The media industry will be watching closely as one of the most high-profile corporate standoffs in recent years continues to unfold.
Warner Bros. Discovery’s rejection of Paramount’s revised offer highlights the growing divide between aggressive acquisition strategies and risk-averse corporate governance. Despite higher fees and stronger financial backing, WBD believes the Paramount deal carries too much uncertainty.
By standing firm with Netflix, Warner Bros. Discovery has made its priorities clear: predictable execution, reduced legal exposure, and long-term shareholder confidence.
