If at first you don’t succeed, try, try, try, try, try, try, try, and then, just for good measure, try an eighth time. At this point, it’s safe to say that Paramount is behaving like a deranged stalker determined to get its hands on Warner Bros. Discovery (WBD) by whatever means possible. But WBD’s so-called “noble” protector, Netflix, is standing like a mountain between these two entities.
On Wednesday, the WBD board issued a polite but firm “thanks, but absolutely not” to David Ellison’s latest $108 billion attempt to crash their merger party with Netflix.
For the eighth time, the WBD Board of Directors has formally rejected an acquisition proposal from David Ellison’s Paramount Skydance, signalling that no amount of billionaire-backed equity can distract them from their pending merger with Netflix.
In other words, this is officially the eighth time WBD has swiped left on Paramount. At this point, it’s less of a corporate negotiation and more of a romantic comedy where the lead doesn’t realise they’re actually the antagonist.
The rejection, detailed in a pointed letter to shareholders on Wednesday, hints at a rift between Paramount’s vision of a leveraged buyout and WBD’s preference for the relative stability of a Netflix partnership.
The WBD board’s letter was uncharacteristically blunt regarding the “insufficient value” and “extraordinary risk” presented by the Paramount offer.
Despite David Ellison securing a formal backstop from his father, Oracle co-founder Larry Ellison, resolving concerns about previously opaque financing, the board remains unmoved by the headline $108 billion figure.
Apart from issues associated with the price per share, WBD cannot completely ignore the collateral damage that would come with switching sides.
Abandoning the Netflix deal would trigger a $2.8 billion break-up fee. When combined with debt exchange failures and interest expenses, the board estimates a Paramount pivot would cost the company approximately $4.7 billion ($1.79 per share).
WBD characterised the Paramount proposal as a massive leveraged buyout (LBO) that would result in $87 billion of total gross debt. The board noted the inherent risk of a $14 billion company (Paramount) attempting to absorb a much larger entity through “junk” rated financing.
In contrast to Paramount’s 12–18 month closing window and regulatory hurdles, the board highlighted Netflix’s $400 billion market capitalisation and investment-grade balance sheet as the safer, more certain path for shareholders.
Perhaps the most revealing (and quite hilarious) aspect of the ongoing saga is the communication breakdown. The WBD board expressed frustration that, despite providing “explicit instructions” on how to improve the bid, Paramount continued to submit proposals with the same identified deficiencies.
Warner Bros. Discovery is currently moving full steam ahead with the Netflix merger, which includes a planned separation of Discovery Global and Warner Bros. assets. However, Paramount has indicated it is not ready to concede. Yes, this scenario does rather remind one of the hit Kishore Kumar song, “Tera Peechha Na Chhodunga Soniye.”
Paramount’s next move likely involves a choice between two extremes: significantly increasing the cash offer to offset the $4.7 billion in switching costs, or taking the fight to the courtroom by alleging that the WBD board is breaching its fiduciary duty to shareholders by ignoring a higher cash bid.
For now, the WBD board’s message is clear. They prefer the compelling value of Netflix over the “extraordinary debt” of an Ellison-led future. Stay tuned for more updates.
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