Warner Rejects Paramount's Revised $108.4 Billion Bid, Reaffirms Commitment to Netflix Deal

Warner Bros. Discovery (WBD) has rejected a revised $108.4 billion bid from Paramount Skydance (PSKY), citing concerns over the heavy debt financing and risks involved. The revised offer, announced on December 22, included a $40.4 billion personal guarantee from Oracle founder Larry Ellison and an increased reverse termination fee. However, Warner's board deemed it insufficient compared to the terms of its merger agreement with Netflix.

The board emphasized that Paramount's proposal lacks the certainty and protections for shareholders provided by the Netflix deal. "The Board unanimously determined that the Paramount's latest offer remains inferior to our merger agreement with Netflix across multiple key areas," said board chair Samuel Di Piazza, Jr. The Netflix deal, valued at $82.7 billion, includes a cash-and-stock transaction offering $27.75 per WBD share.

Warner is now back on track to complete its acquisition by Netflix, which includes the studios, HBO Max, and HBO. The board reiterated its recommendation for shareholders to reject the Paramount offer. The decision underscores the board's belief in the strategic and financial advantages of the Netflix deal.

What the Revised Paramount Offer Entails

Paramount's amended bid included a personal guarantee from Larry Ellison, addressing previous concerns about the lack of a guarantee from the Oracle founder. The offer also raised its reverse termination fee to $5.8 billion, matching the level in the Netflix deal. Despite these improvements, Warner's board found the overall terms of the bid to involve significant costs and risks.

The board highlighted the "extraordinary amount of debt financing" required for the Paramount deal, which could complicate the closing process. Warner would be obligated to pay a $2.8 billion termination fee for abandoning its Netflix merger, along with $1.5 billion in fees to lenders and $350 million in additional financing costs.

Market Reactions to Warner's Decision

Warner Bros. Discovery shares closed at $28.47 on Tuesday, down slightly from recent levels. Netflix's stock climbed 0.4% in premarket trading, while Paramount shares fell 0.2%. The decision was welcomed by Netflix, which reiterated its commitment to the merger agreement.

The stock move reflects the market's interpretation of the decision as a win for Netflix and a sign that regulatory hurdles may be manageable. The board's stance is expected to give Netflix a clearer path to completing the $82.7 billion deal.

What Analysts Are Watching Next

Analysts are closely monitoring the regulatory landscape for the Netflix deal. The merger will require approval from the U.S. Justice Department and potentially other international regulators due to its scale and potential antitrust implications. The board expects the transaction to close in 12–18 months, pending regulatory approvals.

Investors are also watching for any further developments in the Paramount offer. While Paramount has not commented on the rejection, analysts speculate that the company may continue to seek support from shareholders or explore other strategic options.

The focus remains on how the deal will reshape the media and entertainment landscape. The merger between Netflix and Warner Bros. could create a dominant force in content production and streaming, influencing the broader industry dynamics.