In a decisive move that sent shockwaves through Burbank, Warner Bros. Discovery has formally instructed its investors to spurn the $108.4 billion tender offer from Paramount Skydance.
In a stinging Warner Bros letter released today, the board unanimously reaffirmed its commitment to a merger with Netflix, characterizing the competing WB Paramount proposal as a high-stakes gamble built on shifting sands.
The rejection serves as a definitive "no" to David Ellison’s hostile takeover attempt, with the board accusing Paramount of failing to provide concrete financial certainties despite months of negotiations.
The ‘Illusory’ Nature of the Bid
The board’s primary grievance lies in the perceived fragility of the Warner Bros Paramount deal’s funding. According to the official statement, the multibillion-dollar equity commitment lacks a firm guarantee from the Ellison family, relying instead on a "revocable trust" that the board views as a major structural weakness.
"PSKY has consistently misled WBD shareholders that its proposed transaction has a 'full backstop' from the Ellison family. It does not, and never has," the board stated. "Instead, they propose that you rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding."
The letter further elaborated on the risks of this arrangement, noting that "revocable trusts typically have provisions allowing for assets to be moved at any time," and that the documents provided contain "gaps, loopholes and limitations that put you, our shareholders, and our company at risk."
Financial Risks and the Netflix Preference
While the headline figure of $30 per share from Paramount outstrips the Netflix offer, the WBD board argues the net value is deceptive. The board highlighted that Warner Bros rejects Paramount in part because of the "untenable degree of potential downside" for those holding the stock.
A significant hurdle cited was the immediate financial penalty of breaking existing agreements. WBD would be forced to pay Netflix a $2.8 billion termination fee—a cost the board notes "PSKY has not offered to reimburse."
"This additional $4.3 billion in potential costs represents approximately $1.66 per share to be borne by WBD shareholders if the offer does not close."
Regulatory and Operational Hurdles
Beyond the balance sheet, the board dismissed claims that a Warner Bros acquisition by Paramount would face fewer antitrust hurdles than the Netflix deal. They noted that Netflix has already agreed to a "record-setting regulatory termination cash fee of $5.8 billion," significantly higher than what was offered by the Ellison-led bid.
Ultimately, the board’s decision rested on the binding nature of their current path versus the volatility of the new one.
"The PSKY offer is illusory... It can be terminated or amended by PSKY at any time prior to its completion; it is not the same thing as a binding merger agreement."
As the deadline for shareholder action approaches, the message from the board is clear: the certainty of the Netflix combination represents the "superior, more certain value" for the future of the storied studio.
Comparison of Merger Terms (Per Board Letter)
| Feature | Netflix Combination | Paramount Skydance Offer |
| Cash Consideration | $23.25 per share | $30.00 per share |
| Financing Backstop | Investment Grade Balance Sheet | “Opaque” Revocable Trust |
| Regulatory Fee | $5.8 Billion | $5.0 Billion |
| Status | Binding Merger Agreement | “Non-Binding” Tender Offer |
For the full breakdown of the board's reasoning and the specific financial deficiencies cited, you can download the Warner Bros Discovery Official Letter (PDF) here.
Is the Ellison family's "revocable trust" a dealbreaker for you? The industry is divided, and the conversation is moving fast. Head over to social media to see the latest buzz and join the debate on whether Warner Bros. is making the right call by sticking with Netflix.
