Warner Bros. Discovery rejects Paramount Skydance hostile bid, backs Netflix deal

Paramount's backers are already backing out

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Editor's take: It's no surprise that WBD recommended investors reject Paramount's offer. Beyond the $5.8 billion breakup fee with Netflix, it was clear that the $14 billion bidder lacked the clout of the streaming giant. Shareholders still have the final say, but Paramount is unlikely to win this tug-of-war.

Warner Bros. Discovery's board has formally rejected Paramount Skydance's hostile takeover bid, urging shareholders to stick with Netflix's previously announced acquisition. The decision shuts down Paramount's attempt to wrest control of the media giant just days after taking its offer directly to investors.

In a letter sent Wednesday, the board said Paramount's $30-per-share, all-cash bid posed "significant risks and costs" and lacked the certainty of Netflix's binding agreement. Reuters reports that WBD characterized Paramount's proposal as inferior on both financing and execution, favoring Netflix's $27.75-per-share deal despite the lower headline price.

The rejection follows a brief but aggressive bidding clash. Netflix agreed earlier this month to acquire WBD's film and television studios, HBO, and HBO Max in a transaction valued at $82.7 billion, leaving the company's linear television networks to spin off separately as Discovery Global. Paramount Skydance countered days later with a bid for the entire company, including cable assets such as CNN, Discovery, and TNT for $108 billion.

Warner Bros. Discovery said its board found no meaningful regulatory advantage in Paramount's offer, contradicting claims from Paramount Skydance CEO David Ellison that his deal would face an easier approval process. Instead, the board concluded the two transactions carry similar regulatory risk while offering very different levels of financial certainty.

WBD's recommendation sent Paramount's stock tumbling 5%, while Netflix ticked up 1.2%.

Financing emerged as a central concern. Warner Bros. Discovery said Paramount repeatedly misrepresented the strength of its equity backstop, arguing that the bid relies in part on a revocable trust tied to the Ellison family rather than a firm, unconditional commitment. The board said the structure allows trustees to move assets at any time and exposes shareholders to outsized downside if market conditions shift.

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The company also raised questions about Paramount's balance sheet. Netflix, the board noted, has an investment-grade credit rating and a market capitalization exceeding $400 billion. Paramount, by contrast, carries a credit rating hovering near junk status and a market value of roughly $15 billion, with a combined company projected to carry heavy leverage and limited free cash flow.

Adding to Paramount's challenges, one of its financial partners recently exited the deal, further weakening the bid's credibility. The WBD board held extensive discussions with Paramount across multiple bids and provided detailed feedback, but never received a proposal it considered superior to Netflix's agreement.

While the board's recommendation does not prevent shareholders from tendering their shares to Paramount, it signals strong institutional support for the Netflix transaction. For now, Warner Bros. Discovery appears intent on closing the deal it already has – and leaving Paramount's hostile bid on the outside looking in.