Warner Bros. urges shareholders to reject hostile Paramount offer

Hollywood implications for Netflix, Warner Bros. deal

We are learning more after last week’s announcement that Netflix agreed to a deal with Warner Bros. Discovery to purchase the Hollywood titan's studio and streaming business for $72 billion. The deal would see the merger of two of the entertainment industry's largest companies in film and TV. Here to talk about the very real implications for creatives working in Hollywood is Director and Producer, Johnathan Brownlee.

Warner Bros. Discovery is urging shareholders to reject a hostile buyout bid from Paramount Skydance and stick with the $72 billion Netflix offer Warner agreed to earlier this month. 

Warner, which owns the Warner Bros. Pictures movie studio and HBO, announced the cash-and-stock offer from Netflix on Dec. 5. As part of the deal, Warner will sell off its cable TV assets, including CNN and Discovery. Days later, Paramount made a hostile, all-cash offer of $77.9 billion for all of Warner’s properties.

Because Paramount went directly to investors with a hostile bid, it’s ultimately up to shareholders to decide.

Warner Bros. board rejects Paramount offer

What they're saying:

In a letter to investors, the Warner Bros. board said the Netflix deal will better serve the company’s interests and audiences.

RELATED: Netflix facing class action lawsuit over Warner Bros. deal

They called Paramount’s hostile offer "inferior," mostly because the acquisition would rely heavily on borrowed money, while Netflix is worth more than $400 billion. 

FILE - A Warner Bros (Discovery) sign (Photo by Aleksander Kalka/NurPhoto via Getty Images)

Paramount’s deal would use a family trust of Paramount CEO David Ellison to backstop the offer for Warner, which it said is not the same thing as a "full and unconditional financing commitment." 

Warner’s board also cited concern about the involvement of foreign investors. The sovereign wealth funds of Saudi Arabia, Abu Dhabi and Qatar are backing Paramount’s bid.

The other side:

Paramount has countered that its offer would be more easily approved by federal regulators who are sure to scrutinize either deal.

"We will continue to move forward to deliver this transaction, which is in the best interest of (Warner) shareholders, consumers, and the creative industries," David Ellison said.

By the numbers:

Netflix offered Warner shareholders $23.25 in cash, plus $4.50 in Netflix shares, for each share of Warner. Paramount is offering $30 in cash for each Warner share.

Warner’s stock price fell more than 1% Wednesday to $28.52 per share. Shares of Paramount fell 5.4%, while those of Netflix rose 2.5%.

What's next:

Warner shareholders have until Jan. 8 to vote on Paramount’s offer.

Both deals raise alarm 

Big picture view:

Both proposed deals have raised concerns over what they could mean for film and TV production. Netflix has agreed to honor Warner’s contractual obligations for releasing films in theaters, but critics fear the streaming giant will ultimately favor online releases. Paramount and Warner Bros. are two of the biggest studios left in Hollywood.

A Paramount-Warner merger would bring CBS and CNN under the same roof, leading to questions about news consolidation and shifts in editorial control — as seen at CBS News leading up to and following Skydance’s $8 billion purchase of Paramount.

Critics of Netflix’s deal say combining Netflix with Warner’s HBO Max would give it overwhelming market dominance. Paramount+ streaming service is much smaller.

Trump’s involvement

Dig deeper:

President Donald Trump says he plans to play a role in the regulatory approval process, which also raises concerns over his close relationship with billionaire Larry Ellison — the father of Paramount’s CEO.

Affinity Partners, an investment firm run by Trump’s son-in-law Jared Kushner, previously said it would invest in the Paramount deal. But on Tuesday, the firm announced it would be dropping out.