Warner Bros. tells shareholders that Larry Ellison's wealth isn't enough to best Netflix bid

By Lukas I. Alpert

The Warner board says Paramount's latest offer, backed by Ellison's personal fortune, remains inferior to Netflix's accepted proposal, urging shareholders to reject the hostile bid

Warner Bros. Discovery's board said it was unswayed by Larry Ellison's personal backing of a merger proposal by his son's company, Paramount Skydance, and urged shareholders to stick with Netflix's already-accepted bid. (Photo by TORU YAMANAKA / AFP via Getty Images)

Even Larry Ellison's vast personal fortune isn't enough to convince Warner Bros. Discovery to change its mind on its deal with Netflix.

The Warner Bros. (WBD) board said Wednesday that it had recommended that its shareholders reject Paramount Skydance's (PSKY) latest takeover offer, saying that even with Ellison's personal backing, it remained inferior to Netflix's (NFLX) already-accepted bid.

The determination comes just weeks after Paramount had sweetened its $108 billion hostile takeover bid with Ellison, the father of Paramount Chief Executive David Ellison and one of the richest people in the world, pledging his personal fortune as a financing backstop. The updated offer did not, however, offer more than its original price of $30 per share.

Representatives for Paramount didn't immediately respond to messages seeking comment.

Warner Bros. Discovery had earlier rejected Paramount's offer in favor of Netflix's $82.7 billion bid, saying the use of a revocable Ellison family trust as a financing guarantee was insufficient.

Netflix's offer, which Warner Bros. accepted in early December, is only for the company's studio and streaming businesses, while Paramount has offered to acquire the entirety of the company, including Warner's declining cable-television division, including channels CNN, TBS and the Discovery Channel.

Despite the personal guarantee by Ellison, the co-founder of Oracle Corp. (ORCL), the Warner Bros. Discovery board said it found the new Paramount offer to still be insufficient compared with the Netflix bid, citing the Paramount bid's high debt component. The board also said it believed Paramount's bid undervalued the company.

"Paramount's offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed," said Samuel Di Piazza, Jr., chairman of the Warner Bros. Discovery board. "Our binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount's offer would impose on our shareholders."

Netflix said in a statement that it appreciated the Warner Bros. Discovery board's vote of confidence and that it had already begun engaging with regulatory authorities in the United States and in Europe about approving the deal. Netflix has said it expects the deal to take 12 to 18 months to close.

The deal is expected to face significant regulatory hurdles in Washington and in Europe, and the Trump administration has signaled that it intends to scrutinize the transaction.

Investors have been skeptical about the merger, given its high price and concerns about the direction of the film and television industries, sending Netflix shares to an eight-month low. Netflix shares have fallen 10% since the deal was announced.

Paramount, which had triggered the sales process with an unsolicited offer for Warner Bros. late last year, had been considered to have a leg up given the Ellisons' closeness with the Trump administration. An earlier proposal included financing from Trump's son-in-law, Jared Kushner, although he later pulled out of the deal.

-Lukas I. Alpert

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