Warner Bros. Discovery Inc. is preparing to reject a hostile takeover bid from Paramount Skydance Corp., raising serious concerns over the proposed deal’s financing structure, regulatory hurdles and overall terms, according to people familiar with the matter.
After reviewing Paramount’s offer and holding internal deliberations, Warner Bros.’ board is expected to recommend that shareholders do not tender their shares, the sources said. The board believes the company’s existing agreement with streaming giant Netflix Inc. provides superior value, stronger deal certainty and more favourable conditions than the proposal put forward by Paramount.
A formal response to Paramount’s tender offer could be filed as early as Wednesday, though the decision is not yet final and discussions remain ongoing. Both Warner Bros. Discovery and Paramount declined to comment on the developments.
Financing Structure Raises Red Flags
One of the board’s primary concerns relates to the financing behind Paramount’s bid, which is being led by David Ellison. A significant portion of the equity backing the offer is supported by a trust managing the wealth of his father, Oracle founder Larry Ellison. Because the trust is revocable, Warner Bros. fears that assets could be withdrawn at any time, leaving the company exposed with limited legal recourse.
Compounding these concerns, one of Paramount’s key backers exited the deal earlier this week. Affinity Partners, led by Jared Kushner, son-in-law of US President Donald Trump, confirmed it had withdrawn from the proposed transaction, citing the involvement of “two strong competitors.”
On Tuesday, President Trump also criticised Paramount on social media, claiming he had been treated “far worse” by its CBS division since the Ellison family took control earlier this year. The Ellisons have previously highlighted their cordial relationship with the president.
Operational and Regulatory Concerns
Warner Bros.’ board is also uneasy about the operational constraints the company could face during what may be a lengthy regulatory approval process. Executives fear that the deal, if pursued, could limit Warner Bros.’ ability to conduct day-to-day business, refinance debt, or manage its balance sheet for a year or more while waiting for approvals.
Paramount has stated that it addressed some of these concerns in a recent filing, including providing assurances on refinancing flexibility and backing a proposed $5 billion breakup fee with Ellison family support. The company has also adjusted several deal terms in response to Warner Bros.’ requests.
However, financing complications have persisted. Around $1 billion in funding from China’s Tencent Holdings Ltd. was reportedly withdrawn amid concerns that US regulators could view the investment as a national security risk.
Netflix Deal Seen as More Certain
Earlier this month, Warner Bros. agreed to sell its studios, streaming business and HBO to Netflix for $27.75 per share, valuing the deal at roughly $83 billion including debt. The agreement concluded a competitive bidding process that also involved Paramount and Comcast Corp.
Separately, Warner Bros. plans to spin off its cable television networks, including CNN and TNT, to shareholders ahead of the Netflix transaction’s completion.
Paramount’s hostile offer values Warner Bros. at $30 per share, or more than $108 billion including debt. Just days after the Netflix deal was announced, Paramount bypassed Warner Bros.’ board and took its proposal directly to shareholders through a public tender offer.
Paramount has maintained that its $30-a-share bid is not its “best and final” offer, suggesting it could raise the price. Warner Bros. shares closed at $28.90 in New York, indicating that some investors may be anticipating a higher bid.
Under the terms of its agreement with Netflix, Warner Bros. is prohibited from actively soliciting competing offers but is permitted to consider unsolicited proposals. If a superior offer emerges, the company must give Netflix the opportunity to match it before proceeding with an alternative transaction.
For now, however, Warner Bros.’ leadership appears firmly inclined to stand by the Netflix deal, viewing it as the most reliable path forward amid an increasingly complex takeover battle.