#United States #New York #Netflix #Warner Bros #Paramount

Warner Bros. Discovery Board Advises Against Paramount Tender Offer

In a recent announcement, Warner Bros. Discovery, Inc. (WBD) revealed that its Board of Directors has unanimously recommended shareholders reject the amended tender offer from Paramount Skydance (PSKY), asserting that the proposal does not serve the best interests of the company or its investors. This recommendation comes in light of the favorable merger agreement with Netflix, which the Board considers to be a significantly better option for enhancing shareholder value.

According to the Board's assessment, the terms of PSKY’s offer remain inadequate when compared to the established merger agreement with Netflix, announced on December 5, 2025. WBD's Chair, Samuel A. Di Piazza, Jr., emphasized that the proposed terms include excessive debt financing that would expose shareholders to unnecessary risks and uncertainties, ultimately jeopardizing their financial interests if the transaction were to fail.

Definitive Reasons for Rejection

WBD's Board outlined several critical reasons behind their recommendation:

1. Insufficient Value: The PSKY offer does not provide adequate compensation considering the substantial costs, risks, and uncertainties associated with it when contrasted with the benefits of the Netflix merger. The Netflix agreement guarantees shareholders $23.25 in cash plus shares targeting a value of $4.50, alongside future value creation opportunities. Furthermore, shareholders would maintain their stake in Discovery Global, which is positioned for significant growth.

2. High Costs to Shareholders: If accepted, WBD would incur heavy financial penalties, including a $2.8 billion termination fee payable to Netflix for abandoning the merger, along with a potential $1.5 billion loss from failing to complete a debt exchange. These hypothetical costs amount to approximately $4.7 billion overall, translating into a $1.79 loss per share based on current evaluations.

3. Uncertainty in Closing the Deal: The complicated financing structure proposed by PSKY presents a high risk that the deal might not close successfully. PSKY, with a market cap of $14 billion, is attempting to manage an acquisition requiring a staggering $94.65 billion in financing, making this one of the largest leveraged buyouts in history. Such reliance on substantial debt financing raises flags regarding the viability and safety of this transaction for WBD shareholders, particularly given the current 'junk' credit status of PSKY.

4. Operational Restrictions: Should the PSKY offer go through, it may impose operational limitations on WBD, hampering its ability to innovate or pursue important business strategies. Such clauses could potentially diminish WBD's market competitiveness, jeopardizing shareholder interests even further.

Recommendations for Shareholders

In light of these evaluations, the Board has articulated a strongly unified stance urging shareholders not to tender their shares in this offer. They also encourage stakeholders to review the details of the warning and its implications outlined in their letter to shareholders, which provides an in-depth examination of the Board's recommendations.

Among the notable contrasts, if the Netflix merger faces regulatory hurdles, WBD stands to gain a $5.8 billion termination fee, ensuring better protection for shareholders. In contrast, the assurances and potential payouts associated with the PSKY offer are deemed woefully inadequate to counterbalance even a fraction of the risks involved.

With the situation unfolding, WBD remains steadfast in its commitment to enhancing shareholder value while navigating through acquisitions and mergers in the complex media landscape. It is crucial for shareholders to recognize the implications of these offers and make informed decisions in their best interest. The continuation of successful negotiations towards the Netflix merger, as reiterated by the Board, represents WBD’s focus on leveraging opportunities for significant value creation without incurring excessive risks.

As the decision unfolds, shareholders are advised to stay apprised of developments through WBD's investor relations communications, ensuring they are well-informed amid this highly competitive field. WBD aims to maintain its strategy for growth and value optimization while solidifying its position as a leader in the media and entertainment industry.