Warner Bros Discovery has told shareholders to reject a sweetened 108 billion US dollar (£80 billion) hostile bid from Paramount Skydance and to stick with a rival offer from Netflix.
Paramount, which is controlled by the Ellison family, last month lodged a 30 dollars (£22.50) a share bid for Warner Bros, days after the company agreed to be bought by Netflix in early December in a 72 billion dollar (£54 billion) deal, or 82.7 billion dollars (£62 billion) including debts.
Warner Bros pushed back against the approach, branding it “inadequate”, and said it favours a deal from streaming giant Netflix to take control of its movie studios, cable networks and streaming service.
Paramount updated its offer late last month with an “irrevocable personal guarantee” from Oracle founder Larry Ellison — who is the father of Paramount chief executive David Ellison — to back 40.4 billion dollars (£29.6 billion) in equity financing for the firm’s offer.
Paramount also hiked its promised payout to shareholders to 5.8 billion dollars (£4.3 billion) if the deal is blocked by regulators, matching what Netflix has also pledged.
Samuel Di Piazza Jr, chairman of the Warner Bros board of directors, said: “The board unanimously determined that Paramount’s latest offer remains inferior to our merger agreement with Netflix across multiple key areas.
“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.”
Netflix agreed to buy the Warner Bros Discovery film and TV studios business whereas Paramount has bid for the whole of Warner Bros.
If Netflix is successful, Warner’s news and cable operations including CNN would be spun off into their own company, under a previously-announced separation.
But a tie-up between Netflix and Paramount is expected to face a number of regulatory hurdles.
US president Donald Trump previously warned the Netflix takeover of Warner Bros “could be a problem” because of its combined market share, confirming he would be involved in the decision about whether the US federal government should approve the deal.
Paramount said in its appeal to win over Warner Bros shareholders that its offer would be more likely to pass regulatory scrutiny.
Before taking its bid straight to shareholders, Paramount said it had made six takeover approaches to Warner Bros over 12 weeks, but claimed Warner Bros “never engaged meaningfully”.
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