Warner Bros. shareholders were ‘consistently misled’ by Paramount, board says in rejection letter: There’s no Ellison family backstop, and never was

Warner Bros. Discovery’s board unanimously rejected Paramount Skydance’s roughly $108 billion ($30/share) all‑cash tender, accusing PSKY of misleading shareholders about an Ellison family financing backstop and calling the offer “illusory,” and urged investors to back WBD’s binding merger with Netflix instead. The board said the Netflix transaction—$23.25 cash, $4.50 in Netflix stock plus shares in Discovery Global—is fully financed and supported by an investment‑grade acquirer with robust debt commitments and a $5.8 billion reverse break fee, while PSKY’s bid rests on an opaque revocable trust, a smaller/junk‑rated bidder, can be amended or terminated, and would leave the combined company with an estimated ~6.8x 2026 debt/EBITDA and little near‑term free cash flow. WBD warned that backing PSKY and a subsequent failure would cost shareholders materially (a $2.8 billion termination fee to Netflix plus about $1.5 billion in extra financing costs), and the takeover fight has been further complicated by public political scrutiny and competing claims from Paramount that WBD did not meaningfully engage.

Analysis

Warner Bros. Discovery’s board unanimously rejected Paramount Skydance’s all-cash $30/share tender (roughly $108 billion), accusing PSKY of repeatedly misleading shareholders about an Ellison family financing backstop and characterizing the proposal as "illusory," while reiterating its recommendation that shareholders support the binding Netflix merger offering $23.25 in cash, $4.50 in Netflix stock (within a collar) plus shares in a spun Discovery Global entity. The board emphasized Netflix’s fully financed structure, a market capitalization above $400 billion, robust debt commitments and a $5.8 billion reverse break fee as evidence of greater deal certainty compared with PSKY.

WBD flagged material financing and execution risks with PSKY: the December 8 offer relies on a $40.65 billion equity commitment that, per WBD, includes no unconditional Ellison family backstop but instead an opaque revocable trust whose liability is capped at roughly 7% (about $2.8 billion) of the $108.4 billion transaction, and the bidder itself has an approximate $15 billion market value and credit metrics near junk status. The board warned the PSKY outcome would leave the combined company with an estimated ~6.8x 2026 net debt/EBITDA, virtually no immediate free cash flow, and reliance on $9 billion of synergies largely from job cuts.

On regulatory and deal close dynamics, WBD and Netflix say regulatory risk is comparable and Netflix has filed HSR and expects a 12–18 month close; by contrast, PSKY’s tender expressly permits amendment or termination "at any time," increasing execution risk and potential shareholder losses (WBD cited a $2.8 billion termination fee plus ~$1.5 billion in extra financing costs, ~ $4.3 billion or ~$1.66/share). The takeover fight is further complicated by recent political noise and the withdrawal of a key PSKY participant, amplifying uncertainty and making monitoring of any revised bids (reports that WBD might accept $35/share) and regulatory developments critical to valuation outcomes.

Key Decisions for Investors

• Vote in favor of the Netflix merger as recommended by the WBD board unless materially superior, fully financed and documented terms are presented,
• Do not tender shares into the PSKY offer given the financing opacity of the revocable trust, the bidder's small market cap and near-junk credit profile, and the explicit amendment/termination rights in the tender,
• Monitor for any firm increase to PSKY's price (reports citing $35/share), confirmed unconditional Ellison family commitment, regulatory filings/approvals timing, and disclosures on projected 2026 leverage and synergies before changing position