Warner Bros. Calls for Rejection of Paramount Skydance Offer

NEW YORK (AP) — Warner Bros. has encouraged its shareholders to dismiss a tender offer from Paramount Skydance, citing a competing bid from Netflix as a better choice for customers.

“Today, the Warner Bros. Discovery Board of Directors sent a clear message to our shareholders,” the company stated in a letter. They strongly urged shareholders to reject what they termed Paramount Skydance’s “unilateral, inferior, and illusory tender offer.”

Paramount’s bid has shifted to a more aggressive stance. Last week, Warner’s board pushed shareholders to decline a deal with Netflix that they themselves support.

As it stands, Paramount’s proposal is at $30 per share for Warner, whereas Netflix is offering $27.75.

If a merger between Warner and either company goes through, it would significantly alter the Hollywood landscape and likely draw scrutiny from U.S. regulators due to its potential effects on film production and consumer streaming services, with significant implications for Paramount’s news operations as well.

While Warner’s board expressed disapproval of Paramount’s bid, shareholders could still opt to support it by tendering their shares. This could involve the entire company, including major cable networks like CNN and Discovery.

Unlike Paramount’s bid, Netflix’s proposal does not aim to acquire Warner’s cable segment. Their acquisition plans hinge on regulatory approval and will take place after Warner wraps up its previously disclosed separation plans for the cable business.

Paramount made several bids prior to its Netflix deal, claiming those attempts were rebuffed by Warner management. It’s only since then that Paramount has approached Warner’s shareholders directly.

Critics argue that merging Netflix with Warner’s HBO Max would create a dominant force in the market, while Paramount+ remains relatively small in comparison.

“This isn’t new to us; we’ve been hearing these concerns since we started our streaming business,” said Netflix co-CEOs Greg Peters and Ted Sarandos in a filing via Warner Bros. “We firmly believe this represents a victory, not just an end, for the entertainment landscape.”

The competing bids from Netflix and Paramount raise questions about the future of film and television production. Netflix has pledged to uphold Paramount’s commitments concerning theatrical releases, yet past business practices have led to skepticism regarding Netflix’s reliance on online releases. Paramount and Warner Bros. are among the last of the “big five” traditional studios in Hollywood.

Should Paramount acquire Warner’s cable networks and news divisions, it would unite CBS and CNN under one umbrella, which could intensify media consolidation and stir concerns about editorial choices.

Paramount’s $8 billion acquisition of SkyDance wrapped up in August, drawing interest about how it might influence control over content.

Paramount Skydance has yet to respond to inquiries regarding the current situation.

Politically, former President Donald Trump has previously commented on how politics might sway regulatory approvals concerning the deal. He noted that Netflix’s proposal “could be problematic” owing to its potential to dominate the marketplace. He also has familial connections with Paramount’s CEO’s father, billionaire Larry Ellison, who is known for his support of the acquisition plans.

Before this, Affinity Partners, an investment firm led by Jared Kushner, Trump’s son-in-law, had indicated potential investment in Paramount. However, they recently announced a decline of their bid.

Additionally, foreign sovereign wealth funds from Saudi Arabia, Abu Dhabi, and Qatar are backing Paramount’s offer with substantial financial resources.

Warner Bros. has asserted that Netflix’s offer appears to be the more stable choice, stating, “There are no contingencies, no foreign sovereign wealth funds, no stock collateral or personal loans.” They emphasized their strong market position with a capitalization exceeding $400 billion, and labeled Paramount’s bid as carrying “a number of risks and uncertainties,” including its financial health.