Netflix's latest development in acquiring Warner: the board once again urges shareholders to reject Paramount

Warner Bros. Discovery (WBD) Board of Directors recently unanimously approved a written resolution urging shareholders once again to reject the proposed amended acquisition offer from Paramount Skydance. In a public letter to shareholders, the Warner board explicitly stated that the offer remains insufficient, not only due to high financial structural risks but also because it could adversely affect the company’s long-term value and transaction certainty. They reaffirmed that the previously selected Netflix (NASDAQ: NFLX) merger plan remains the most beneficial option for shareholders.

Key Differences Between the Netflix and Paramount Plans

The board letter pointed out that although Paramount Skydance’s latest overall valuation proposal of up to $108 billion appears higher than Netflix’s $82 billion, there are fundamental differences in transaction structure and risk allocation. Netflix’s proposal involves only acquiring core entertainment assets such as Warner Bros. Studios, HBO, and HBO Max, while other assets like CNN, HGTV, Food Network, and lifestyle brands will remain with the original shareholders. These assets will be spun off into Discovery Global, allowing shareholders to continue holding and participating in their future development. In contrast, Paramount Skydance’s plan is a comprehensive acquisition aiming to incorporate all assets under WBD. Although the offer price is higher, the board believes that this structure not only deprives shareholders of the opportunity to retain some high-quality assets but also significantly increases transaction execution risks.

Paramount’s Financial Capacity Becomes a Major Concern

The board also expressed particular concern about Paramount’s financial capacity. Currently, Paramount’s market value is approximately $14 billion, far below the scale of funding required for this acquisition, which would necessitate substantial debt and external financing. In comparison, Netflix’s market value exceeds $400 billion, with a solid capital structure and higher transaction certainty. Although key figures behind Paramount Skydance, including David Ellison’s father Larry Ellison, have offered guarantees of up to $40 billion in financing, the WBD board still believes that overall debt levels and integration risks could pressure the financial flexibility of the combined company.

Additionally, the board pointed out that Netflix’s acquisition plan involves partial stock payments, giving shareholders the opportunity to share in the potential appreciation from the streaming giant’s future growth. Conversely, Paramount Skydance’s cash-oriented plan, while seemingly attractive in the short term, may not generate higher long-term returns.

The letter also reminded shareholders that if they accept Paramount Skydance’s hostile takeover offer at this stage, Warner Bros. Discovery might have to pay over $4 billion in termination fees to Netflix, which would directly erode company value and further weaken the attractiveness of that plan.

The Warner Bros. Board emphasized in the letter that the merger agreement reached with Netflix was made after comprehensive consideration of valuation, risks, likelihood of deal completion, and long-term shareholder interests. The board unanimously believes that this merger maximizes company value while effectively reducing downside risks, aligning with the best interests of the company and its shareholders.

Netflix’s acquisition of Warner Bros. still requires approval from U.S. regulatory authorities, and the final outcome remains uncertain. The Warner board urges shareholders to remain patient, carefully consider Paramount Skydance’s high-priced acquisition proposal, and avoid overlooking structural risks and uncertainties hidden behind short-term premiums.

This article, “Netflix Acquisition of Warner Bros. Latest Developments: Board Reiterates Urging Shareholders to Reject Paramount,” first appeared on Chain News ABMedia.