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Warner Discovery Rejects Paramounts Amended Hostile Bid - WSJ 1/7/26 6:40 am

Warner Bros. Discovery recommended its shareholders reject Paramount's amended hostile bid for the company, saying its existing deal with Netflix is stronger.

In a letter to shareholders made public on Wednesday, Warner said the amended Paramount offer wasn't superior, "or even comparable," to the $72 billion Netflix deal for its movie and TV studios and the HBO Max streaming service.

Paramount recently made changes to its $77.9 billion all-cash bid for the entire company, hoping it would prompt Warner to walk away from its agreement with the streaming giant.

Warner's board unanimously decided Paramount's latest offer "remains inadequate particularly given the insufficient value it would provide." The board also cited uncertainty in Paramount's ability to close the deal and the potential risks to shareholders if the proposed transaction fails.

The board's decision to rebuff Paramount is the latest development in the fight for the future of Warner. The company's storied library, home to Harry Potter and Batman, is coveted in Hollywood , offering a way for Paramount or Netflix to add scale and attract and retain streaming customers.

Paramount's amended bid included a personal guarantee from billionaire Larry Ellison , the father of Paramount Chief Executive David Ellison , for $40.4 billion of equity financing. Paramount also increased what is called the breakup fee it would owe Warner if regulators block its deal, matching Netflix 's $5.8 billion figure. Warner rejected Paramount's initial tender offer last month.

Ellison and his backers have repeatedly said they believe they addressed all of Warner's stated concerns and that Paramount's financing for the bid is solid.

In its Wednesday letter, Warner said it would incur billions of dollars in additional costs if it were to drop the Netflix deal in favor of Paramount , adding more risk. Those costs include a $2.8 billion termination fee Warner would have to pay Netflix and a $1.5 billion fee it would incur for failing to complete its debt exchange, which the company said it would not be able to execute under Paramount's offer.

Warner said the Paramount offer is "in effect" a leveraged buyout and would be the biggest such transaction in history. Leveraged buyouts are risky, Warner said, with the dangers increasing with the amount of debt involved. It noted that in such deals, buyers and their financing sources sometimes try to renegotiate the terms before closing.

The Paramount deal would require a massive amount of debt financing to pull off, which carries additional risk and could make it more difficult to close, Warner said.

"Changes in the performance or financial condition of either the target or acquirer, as well as changes in the industry or financing landscapes, could jeopardize these financing arrangements," Warner told shareholders.

Warner shareholders have until Jan. 21 to decide whether to accept Paramount's tender offer after it recently extended the deadline. That date can be extended again.

Netflix signed a deal to pay $27.75 a share in cash and stock for Warner's studios and HBO Max after the entertainment company splits itself in two. Part of Warner's reasoning for favoring Netflix 's deal has been the fact that its stockholders would retain shares in the portion of the company that Netflix doesn't buy, giving them access to potential upside.

Warner's cable TV networks are poised to be housed in a separate publicly traded company called Discovery Global.

Paramount had offered $30 a share for all of Warner, including its cable channels such as CNN , TBS and Food Network. In a sign Warner shareholders expect Paramount to increase the price of its bid, Warner's shares have been trading above the price of the Netflix deal.

On Monday, Warner rival Comcast spun out Versant, which includes many of its TV and media assets. Versant shares closed down 13% on their first day of trading and fell further Tuesday. Wall Street is closely monitoring how Versant trades, as a proxy for the value of Warner's planned cable-TV spinoff. Paramount has argued that Warner's cable networks aren't worth as much as they are being valued at in the deal with Netflix .

A deal with either Warner suitor would need approval from regulators. Some lawmakers and other constituencies, including President Trump , have raised concerns about the market share Netflix would command if it owned HBO Max.

Netflix executives have said they are confident that the deal will pass regulatory muster.

A combination of Warner and Paramount could also face scrutiny because it would put two powerful content producers under one roof. Paramount has said its proposal has a cleaner path to regulatory approval than Netflix 's.

Hollywood unions have expressed concern about both potential combinations and the possible effect on workers.