Warner Bros. Discovery (WBD) has once again dismissed a takeover proposal from David Ellison’s Paramount Skydance, stating that the offer still falls short when measured against the company’s existing merger agreement with Netflix.
In a regulatory filing released Wednesday, WBD confirmed that its board unanimously rejected Paramount Skydance’s revised all-cash proposal of $30 per share.
According to the board, the bid remains inferior in both value and certainty compared with the Netflix transaction already in place.
Board Says Paramount’s Offer Carries Excessive Risk
WBD directors emphasized that Paramount Skydance’s proposal is nonbinding and highly conditional, giving the bidder broad discretion to modify terms or abandon the deal entirely before completion.
The board also questioned Paramount Skydance’s ability to finance and close such a large transaction.
Paramount Skydance, which has a market capitalization of roughly $14 billion, is attempting to fund an acquisition requiring nearly $95 billion in combined debt and equity financing.
WBD characterized the transaction as a leveraged buyout that would rely on more than $50 billion in new debt, making it one of the largest LBOs ever attempted.
The board warned that such a structure significantly increases the risk that lenders could withdraw, renegotiate, or delay funding, particularly in a volatile media and financing environment.
Netflix Deal Viewed as More Secure and Flexible
By contrast, WBD highlighted Netflix’s financial strength as a key differentiator. Netflix currently carries an investment-grade credit rating, a market value of around $400 billion, and projected free cash flow exceeding $12 billion in 2026.
Under the Netflix agreement, WBD shareholders are set to receive $23.25 in cash plus Netflix stock valued at $4.50 per share at closing, subject to a pricing collar.
Shareholders would also retain ownership in Discovery Global, the television-focused entity WBD plans to spin off in 2026.
The board noted that the Netflix deal allows WBD to continue operating with fewer restrictions prior to closing, preserving strategic flexibility and reducing execution risk.
Hidden Costs Reduce Appeal of Paramount Proposal
WBD also outlined significant financial penalties associated with abandoning the Netflix merger.
Accepting Paramount Skydance’s offer would require WBD to pay a $2.8 billion termination fee to Netflix, along with approximately $1.5 billion in failed debt-exchange costs and an estimated $350 million in additional interest expense.
These costs would effectively reduce Paramount Skydance’s proposed $5.8 billion regulatory breakup fee to about $1.1 billion in net value for WBD shareholders—an amount the board described as inadequate compensation for the potential damage if the deal fails.
Operational Restrictions Raise Further Concerns
Another major issue cited by the board involves restrictive covenants Paramount Skydance would impose on WBD during the 12- to 18-month closing period.
These limitations could prevent WBD from refinancing debt, renegotiating affiliate agreements, completing its planned corporate separation, or responding effectively to market conditions.
According to the board, such constraints could weaken WBD’s business performance while still allowing Paramount Skydance to walk away from the transaction under certain conditions.
Board Urges Shareholders Not to Tender Shares
Given the combination of financing risk, operational limitations, and lower effective value, WBD’s board strongly advised shareholders not to tender their shares into Paramount Skydance’s hostile offer.
Directors reiterated that they believe the Netflix merger provides superior value while minimizing downside exposure, and said they remain focused on completing that transaction
