Warner Bros Discovery rejects Paramount’s hostile takeover bid

Warner Bros. Discovery’s board rejected Paramount Skydance’s $108.4bn hostile bid, accusing Paramount of misleading shareholders about a supposed Ellison family backstop after Affinity Partners (a Kushner‑linked fund) withdrew from the financing; the board said the offer carried “numerous, significant risks” and was not fully guaranteed. The board concluded Netflix’s binding $27.75 per‑share merger agreement—with no equity financing and stronger debt commitments—was superior, criticizing Paramount’s complex, cross‑conditional financing and reliance on an opaque Ellison revocable trust that caps liability. The decision strengthens Netflix’s position ahead of an expected spring/summer shareholder vote, heightens scrutiny of the bidders’ financing and regulatory narratives (including references to the Ellisons’ political ties), and triggered market moves with Paramount Skydance down about 3.8%, WBD slightly lower and Netflix up roughly 2.8%.

Analysis

Warner Bros Discovery's board formally rejected Paramount Skydance's $108.4bn hostile takeover bid, stating Paramount repeatedly misled shareholders about a purported Ellison family backstop to the $30-per-share cash offer and characterizing the proposal as carrying "numerous, significant risks." The board emphasized the offer was not fully guaranteed and warned it could be terminated or amended at any time prior to completion.

The board contrasted Paramount's financing with Netflix's binding $27.75-per-share merger agreement, noting Netflix requires no equity financing and has robust debt commitments; Warner Bros' chairman Samuel Di Piazza expects a shareholder vote in spring or early summer. Netflix executives are engaging with the US Department of Justice and the European Commission and have committed to continuing theatrical releases to ease regulatory and market concerns.

Paramount's financing showed fragility after Affinity Partners withdrew and the deal relied on a seven-party cross-conditional structure plus an Ellison Revocable Trust that Paramount says holds >$250bn and ~1.16bn Oracle shares, but Warner Bros said the trust would supply 32% of equity while capping liability at $2.8bn and could withdraw assets. Warner Bros also raised creditworthiness questions about the overall structure.

Market reaction reflected these concerns: PSKY shares fell about 3.8%, WBD declined ~0.4%, and NFLX rose ~2.8%, indicating investor preference for the certainty of Netflix's bid; near-term risks include further backer withdrawals, financing amendments or termination, and regulatory review outcomes.

Key Decisions for Investors

• Consider increasing exposure to Netflix relative to Paramount Skydance and WBD given Netflix's binding $27.75-per-share agreement, stronger debt commitments and supportive market reaction
• Avoid initiating or adding to Paramount Skydance positions until Paramount delivers an unconditional financing backstop and clarifies the effects of Affinity Partners' withdrawal and the Ellison trust liability cap
• Monitor Warner Bros Discovery filings and the expected shareholder vote in spring/early summer and be prepared to adjust WBD exposure if the board formalizes support for Netflix or if competing bids change
• Employ hedges or limit position size to mitigate deal-execution and regulatory risk given the complex, cross-conditional financing structure and ongoing DOJ and European Commission engagement