Warner Bros. Discovery to reject Paramount takeover bid next week, sources say

Warner Bros. Discovery is set to once again rebuff Paramount’s latest takeover bid of $30 per share in cash. The amended offer includes a commitment from Oracle founder Larry Ellison to personally guarantee $40.4 billion in equity financing to close the deal, addressing WBD’s concerns about Paramount’s initial financial backing.

Despite Paramount not increasing its bid beyond $30 per share, the WBD board is expected to reject the offer next week. Earlier this month, WBD announced a deal to sell its studio and streaming assets to Netflix for $27.75 per share and proceed with splitting its cable assets into Discovery Global. Paramount’s bid encompasses the entire company.

Paramount argues that its $30 per share offer surpasses Netflix’s bid, highlighting the potential value of Discovery Global assets at $1 per share, while Netflix and the WBD board estimate it could be valued between $3 and $4 per share, potentially exceeding Paramount’s offer overall.

If Paramount enhances its offer, exceeding expectations for Discovery Global, the WBD board may have to reconsider. With Netflix’s stock price plummeting by over 10% since the deal announcement, the chances of Netflix countering Paramount’s potential raised bid are low. If WBD accepts a superior offer from Paramount, it would owe Netflix a $2.8 billion breakup fee for backing out of the original deal.

If Paramount decides to increase its bid next week, shareholders anticipate a more compelling offer. Should this scenario unfold, Paramount will be under pressure to sweeten the deal and potentially surpass even optimistic projections for Discovery Global. The decision would lie in the hands of the WBD board, considering the market’s response to Netflix’s deal and the potential consequences of reneging on it.

The ongoing negotiations between Warner Bros. Discovery and Paramount are closely watched by market observers and shareholders alike. Paramount’s latest bid and WBD’s impending rejection signal further developments in this high-stakes corporate battle. The outcome will have significant implications for both companies, their shareholders, and the media industry at large.