Warner Bros urges shareholders to reject inferior Paramount offer

Warner Bros Discovery has told its shareholders to reject an “inferior” updated bid from Paramount Skydance to buy the company.

It is the second time in less than a month the Warner Bros board has urged its shareholders to say no to the Paramount offer, after announcing on 5 December that Netflix was buying the company’s film and streaming businesses for $72bn (£54bn).

The Warner Bros board said the offer was not in the best interests of shareholders and had not met the criteria of a “superior proposal”.

Paramount had said its offer was “superior” to the Netflix deal, proposing to buy all of Warner Bros entities including its TV channels including CNN and TNT.

The chair of the Warner Bros board of directors, Samuel Di Piazza Jr, said the board remained unanimous in supporting the Netflix deal instead.

“Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed.

“Our binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount’s offer would impose on our shareholders,” he said in a statement.

One of the key differences between the offers is what parts of Warner Bros each company wants to buy.

The Netflix offer is for the film and streaming parts of Warner Bros, after Warner Bros splits its business into two divisions in the latter part of this year.

Paramount instead wants to buy the whole business, including cable channels such as CNN and its Discovery and free-to-air channels in Europe.

In December, Paramount offered more than $108bn for the entirety of Warner Bros, but the Warner Bros board unanimously recommended its shareholders reject it.

Warner Bros said Paramount amended its offer shortly after, but in a letter to shareholders on Wednesday the Warner Bros board said the offer was “not superior, or even comparable, to the Netflix merger”.

It said Paramount had “repeatedly failed to submit the best proposal” for shareholders, despite being given clear directions for potential solutions to deficiencies in the offer.

Among the issues with accepting the Paramount deal, highlighted in the letter, was the fact Warner Bros would have to pay Netflix $2.8bn for abandoning their merger agreement.

The board also pointed out that Paramount had a market value of $14bn, but was attempting an acquisition that required more than $94bn in debt and equity financing.

“The extraordinary amount of debt financing, as well as other terms of the [Paramount] offer, heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” the letter said.

Paramount has been contacted for comment.

In mid-December, Netflix co-chief executive Ted Sarandos said the deal between the streaming giant and Warner Bros was “in the best interest of stockholders”.