Warner Bros. Counsels Shareholders to Snub Paramount Bid

Warner Bros. Discovery is recommending that investors reject Paramount-Skydance’s hostile bid, claiming the rival offer is risky and underfinanced, while reiterating the board’s stance in favor of Netflix’s earlier bid. In a letter to shareholders, the company said that Paramount’s proposal isn’t backed by credible financing commitments and could burden the company with unnecessary complexity despite its higher headline value.

Why Warner Bros. Discovery is pushing back on the bid

The board contends that the Paramount-Skydance bid is structured with a significant equity component, yet without an agreed-upon commitment from the Ellison family — key to the deal’s architecture. Warner Bros. Discovery said the equity backstop was opaque and revocable, cautioning that it introduces rather than quashing uncertainty in the financing process. Directors, however, maintain that Netflix’s offer is backed by more strictly enforceable financing conditions and that it explains its execution terms with greater clarity.

The distinction matters. In hard-fought media deals, the credibility and assuredness of funds can matter as much as the sticker price. Investors have watched deals fall off the rails when equity sponsors change, terms get more onerous, or outsized regulatory concessions take the economics of a deal past the point of no return. Warner Bros. Discovery is leaning into that recent history, aiming to portray Paramount-Skydance’s bid as more promise than proof.

Financing and potential national security review issues

Paramount’s bid is believed to be tied to funding from Middle Eastern sovereign wealth funds, such as those in Saudi Arabia, Qatar, and Abu Dhabi. That mix could attract a review by the Committee on Foreign Investment in the United States, the interagency panel that reviews foreign participation in sensitive sectors. And while entertainment is not defense, content ownership and distribution have gained political attention — especially when it involves foreign funding.

Warner Bros. Discovery has signaled that it was already anticipating such scrutiny and suggested that investors should discount bids that come with long national security review periods or could be changed by them. Even if regulators eventually approve a deal, an extended process can amplify execution risk, add to costs, and erode negotiating leverage.

The competing offers, in brief and key differences

Netflix has its eye on acquiring Warner Bros. Discovery’s studios and streaming business, in a deal worth an estimated $82.7 billion, according to people familiar with the offer. Later that month, Paramount-Skydance retaliated with an unsolicited hostile takeover bid of about $108 billion for all of Warner Bros. Discovery, including its cable networks.

High price and all, Warner Bros. Discovery’s board contends that Netflix’s bid has more robust funding assurances and similar regulatory consequences. The directors told shareholders they did not see a material difference in regulatory risk between the two offers, noting that both would require close antitrust review but are feasible under U.S. and international regimes.

What it means for Warner Bros. Discovery shareholders

The board’s recommendation tees up a high-stakes vote that is expected in the coming months. A rejected bid from Paramount-Skydance would ratchet up pressure on David Ellison’s group to solidify its equity commitments or consider adjustments to terms of the deal. It also fortifies Netflix’s position by highlighting financing certainty and speed of execution, two attributes highly valued in complex carve-outs.

Balance-sheet realities will loom large. Warner Bros. Discovery has concentrated on paying down debt since its 2022 combination, telling investors it would focus on free cash flow and disciplined investment. Company filings indicate free cash flow in the neighborhood of $6 billion in 2023, an amount management cites often when explaining a buffer through which to navigate a choppy ad market and streaming profitability targets. And any acquirer has to present a capital plan that enhances, rather than endangers, that trajectory.

Industry context and precedent for major media mergers

Consolidation is still the media narrative. Disney’s takeover of most of 21st Century Fox remade studio economics, and Amazon’s deal to buy MGM proved that tech platforms are not too cheap to pay up for libraries and franchises that travel well around the globe. Regulators have permitted big entertainment deals to move forward, but with increased focus on how they affect consumers and market concentration in streaming, sports rights, and production capacity.

Any buyer of Warner Bros. Discovery gains iconic IP and global distribution heft but also integration headaches. And the success of a deal can depend less on headline synergies and more on cultural fit, cash discipline, and a clearly articulated approach to streaming unit economics — things that broad financing waterfall dynamics and protracted timelines can easily wash away shareholder value.

What comes next in the Warner Bros. Discovery bidding

Warner Bros. Discovery’s board chair has signaled that the shareholder vote is expected in spring or early summer, which would allow both bidders time to tweak their terms. Netflix, whose co-CEO Ted Sarandos has said its approach would serve Warner Bros. Discovery shareholders, is expected to have a focus on speed and certainty. Paramount-Skydance would have the option to react by firming up its equity backstop, boosting its reverse termination fee, or making clearer governance protections in a bid to quell investor unease.

For now, the company’s message to advisers is clear enough: higher isn’t always better when money is in question and paths to review are unpredictable. They will choose whether they value getting a premium price or a de-risked road to closing — and which bidder can deliver both.