“Warner Bros. Discovery reports that over 93% of its shareholders have rejected Paramount Skydance’s hostile takeover bid, labeling it an ‘inferior scheme’ due to inadequate value, high debt risks, and uncertain financing, while favoring Netflix’s $83 billion merger agreement for its superior certainty and shareholder protections.”
Warner Bros. Discovery Investors Slam Paramount’s ‘Inferior Scheme’
In the escalating battle for control of Warner Bros. Discovery (WBD), a chorus of investor discontent has emerged against Paramount Skydance’s aggressive pursuit. Shareholders, representing a staggering 93% of the company’s equity, have voiced their opposition to what WBD’s leadership describes as an “inferior scheme” proposed by David Ellison’s media empire. This rejection underscores deep-seated concerns over the structure and viability of Paramount’s $108 billion all-cash offer, which values WBD shares at $30 each, compared to the more streamlined $83 billion deal with Netflix that promises $27.75 per share but with fewer execution hurdles.
The core of the investor backlash centers on Paramount’s financing model, which relies heavily on an extraordinary $40.65 billion in debt commitments without the ironclad equity backstop initially touted. Critics argue this setup exposes WBD shareholders to substantial risks, including potential deal failure if market conditions sour or regulatory scrutiny intensifies. In contrast, Netflix’s proposal is backed by robust cash reserves and a merger agreement that includes strong protections against breakage fees and antitrust contingencies. This disparity has led many institutional investors, including major funds with significant stakes in WBD, to publicly align with the board’s recommendation to tender shares toward the Netflix transaction instead.
Breaking down the offers highlights the perceived imbalances:
| Aspect | Netflix Offer | Paramount Skydance Offer |
|---|---|---|
| Total Value | $83 billion | $108 billion |
| Per-Share Price | $27.75 | $30 |
| Financing Structure | Primarily cash-funded | Heavy debt reliance ($40.65B equity commitment, but revocable trust-based) |
| Shareholder Risk | Low, with built-in protections | High, due to debt risks and no family backstop |
| Regulatory Certainty | Comparable, with reverse termination fees | Elevated uncertainty from complex funding |
| Deal Certainty | High, unanimous board approval | Questioned, with ongoing legal challenges |
This table illustrates why investors view Paramount’s bid as riskier despite the nominally higher valuation. The debt-heavy approach could saddle the combined entity with burdensome interest obligations, potentially eroding long-term value in an industry already grappling with streaming profitability challenges. Moreover, the absence of a direct commitment from the Ellison family—despite their vast resources—has been flagged as a red flag, suggesting the offer might be more illusory than substantive.
Key points fueling investor skepticism include:
Financing Opacity : Paramount’s repeated claims of a “full backstop” have been debunked, revealing reliance on an opaque revocable trust rather than unconditional family equity. This has led to accusations of misleading shareholders, further eroding trust in the proposal.
Execution Risks : The hostile nature of the bid has sparked a proxy fight and impending lawsuits, including a Delaware court challenge where Paramount seeks to force WBD engagement. Investors worry this could drag on for months, incurring millions in legal fees and distracting management from core operations like content production and subscriber growth.
Value Dilution Concerns : While $30 per share sounds appealing on paper, analysts point out that post-merger synergies under Paramount might not materialize as effectively as under Netflix. The latter’s global scale, with over 325 million subscribers, could better integrate WBD’s assets like HBO Max and CNN, driving higher revenue per user through bundled offerings.
Market Reaction : Real-time trading data reflects this sentiment. As of the latest market close, WBD shares traded at $28.375, up a modest 0.05% on volume of 2.37 million shares, hovering near the Netflix offer price but below Paramount’s bid—indicating market doubt over the hostile offer’s success. Netflix (NFLX) shares climbed 2.38% to $85.53 on robust volume of 26.94 million, buoyed by confidence in the deal’s accretion to earnings. Meanwhile, Paramount Skydance (PSKY) dipped 0.38% to $11.735 on lighter volume of 0.74 million, signaling investor unease about overextension.
Paramount’s strategy has evolved amid the pushback, with extensions to the tender offer deadline now set for early February 2026, allowing more time to woo holdouts. Yet, this move has been met with derision from WBD insiders, who liken it to desperate “gimmicks” rather than substantive improvements. Efforts to highlight synergies, such as combining Paramount+ with HBO Max to challenge Netflix’s dominance, have fallen flat, as investors prioritize deal certainty over speculative upside.
Broader industry implications are also at play. A Netflix-WBD tie-up would create a streaming behemoth controlling roughly 40% of U.S. market share, prompting antitrust concerns that have drawn Senate hearings. Ted Sarandos, Netflix’s co-CEO, is slated to testify, emphasizing the deal’s pro-competitive benefits like enhanced content diversity and innovation in ad-supported tiers. On the flip side, Paramount’s bid raises questions about media consolidation under Ellison’s vision, potentially merging franchises like Star Trek with DC Comics but at the cost of higher leverage.
Investor letters and proxy statements reveal a unified front against Paramount. One major stakeholder, holding over 5% of WBD, stated in filings that the “inferior scheme” fails to account for WBD’s improving fundamentals, including a 15% year-over-year increase in streaming subscribers to 128 million and cost savings from recent restructurings. These gains, they argue, are better realized under Netflix’s operational expertise than Paramount’s debt-laden framework.
The standoff has also spotlighted governance issues. WBD’s board, led by Chair Samuel A. Di Piazza, Jr., has emphasized its fiduciary duty, unanimously rejecting Paramount’s overtures after multiple reviews. This includes dismissing earlier non-binding proposals as undervaluing WBD’s intellectual property portfolio, which spans Batman to Shark Week.
As the drama unfolds, smaller retail investors are caught in the crossfire, weighing short-term gains from tendering to Paramount against long-term stability with Netflix. Advisory firms like ISS and Glass Lewis have sided with WBD’s board, recommending against the hostile bid in their reports, citing the “significant risks and costs” it imposes.
In the boardroom, tensions run high. Paramount’s Chief Legal Officer has accused WBD of a “tilted and unfair” sale process favoring Netflix, but WBD counters that it engaged openly before committing to the superior offer. This back-and-forth has fueled speculation of a sweetened Paramount bid, perhaps upping the ante to $32 per share, though no such indications have materialized.
Financial metrics further bolster the investor stance. WBD’s enterprise value-to-EBITDA multiple under Netflix’s deal stands at 8.5x, more attractive than the 9.2x implied by Paramount once debt is factored in. Free cash flow projections for the combined Netflix-WBD entity estimate $12 billion annually by 2027, versus $9.5 billion under Paramount, due to Netflix’s lower content spend efficiency.
Sector analysts project that if Paramount withdraws, WBD shares could rally 10-15% on deal certainty, while a forced acceptance might trigger a 5-8% drop from litigation overhang. This calculus has solidified investor resolve, turning what began as a merger rumor into a full-blown corporate showdown.
Disclaimer: This news report is for informational purposes only and does not constitute investment advice or recommendations. All tips and insights are derived from publicly available sources.
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