- Warner Bros. Discovery rejected Paramount/Skydance’s revised $108.4B ($30/share) all-cash bid and urged shareholders to back its pending Netflix deal instead.
- WBD said Paramount’s proposal is overly leveraged and uncertain, hinging on about $54B of debt and a $40.4B equity backstop tied to Larry Ellison.
- WBD estimates roughly $4.7B (~$1.79/share) in break and financing costs would materially reduce Paramount’s headline value versus Netflix’s cash-and-stock offer.
- The Netflix transaction is positioned as higher-certainty and better aligned with WBD’s plan to sell studios/streaming while spinning off its cable and news networks into a new public company.
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Pic of the competitive landscape: WBD is pursuing a transaction with Netflix valued at approximately $82.7 billion, under which Netflix would acquire WBD’s studios, streaming assets (including HBO, HBO Max), while WBD’s cable and news networks (e.g., CNN, Discovery) would be spun off as a separate public entity named Discovery Global. Paramount’s amended bid is for the entire company—a $108.4 billion all-cash offer, including the cable networks,.
From a structural finance standpoint, WBD’s board has serious reservations about Paramount’s financing: the offer relies on $54 billion of debt, $40.4 billion of equity with a personal guarantee from Larry Ellison, and yields nearly 7× leverage versus Paramount’s ca. $14 billion market cap. WBD considers that level of leverage high risk, particularly for a company like Paramount with non-investment-grade credit status and negative free cash flow,.
Economically, even though Paramount’s $30/share figure beats Netflix’s headline $27.75/share equivalent (cash-and-stock), the incremental costs tied to breaking with Netflix (termination fee, debt exchange penalties, interest) amount to approximately $4.7 billion, or ~$1.79 per share—eroding much of the premium. WBD’s board claims that when adjusted for those costs and deal risk, the Netflix proposal delivers superior value with greater assurance,.
Strategically, WBD is favoring a lower headline value but more reliable execution. The Netflix deal carries fewer conditional obligations, cleaner regulatory risk, and aligns with WBD’s corporate plan to separate cable/networks businesses. Paramount’s structure imposes operating restrictions that would delay or block some of WBD’s strategic moves, and its uncertain guarantees (including concerns over the backstop from Ellison family trust) add to the board’s hesitation,.
Looking ahead, open questions revolve around how—or if—Paramount can significantly improve its offer (either in cash consideration, guarantee strength, or risk mitigation), whether the Netflix deal will withstand regulatory and antitrust hurdles, and how WBD shareholders, especially dissenting ones, will respond. Also of interest is whether external factors (market conditions, interest rates, financing environment) shift calculation of debt risk before the Jan. 21 tender deadline,.
Supporting Notes
- WBD rejected Paramount’s amended $30/share all-cash bid worth $108.4 billion, calling it a leveraged buyout under which Paramount would take on ~$54 billion of debt and rely on equity guarantees from Larry Ellison,.
- The board highlighted that Paramount’s market capitalization is ~$14 billion, making the financing requirement almost seven times its size.
- Paramount raised its break-up fee to $5.8 billion in the amended bid; however, WBD noted that other costs—$2.8 billion in termination fees to Netflix, $1.5 billion in penalties related to debt exchange, and ~$350 million in incremental interest—would apply, reducing net value,.
- Netflix’s offer, by contrast, focuses only on studios and streaming assets, values WBD at $82.7 billion (or ~$27.75/share on a cash-and-stock basis), excludes cable/networks which would be spun off, and is backed by stronger financial metrics (investment-grade rating, higher free cash flow),,.
- WBD board emphasized that Paramount’s offer lacks sufficient protections for shareholders and lacks the certainty of closing, pointing to its debt profile, operating restrictions, and uncertain guarantees (noting that the Ellison family trust backstop had limitations),.
- Shareholders have until January 21 to tender their shares in the Paramount offer; WBD is urging them to reject it and instead support the Netflix transaction,.