Paramount Global Bid Faces Board Rejection and Financing Scrutiny

The board of Warner Bros. Discovery (WBD) has unanimously advised its shareholders to reject a cash acquisition proposal for Paramount Global, valuing the company at $30 per share. The offer, extended by Paramount Skydance, has been labeled as carrying "numerous and substantial risks." In contrast, WBD reaffirmed its commitment to a binding merger agreement with Netflix, established on December 5.

The market's initial response to the board's recommendation was decisively negative. Paramount Global's share price declined between 3.8% and 5% following the announcement.

The competing proposals present a clear valuation gap:
* The Paramount Skydance bid stands at $30 per share, implying a total valuation of approximately $108.4 billion.
* The existing WBD/Netflix agreement offers $27.75 per share. This consists of $23.25 in cash and $4.50 in Netflix stock, plus value derived from the spin-off of Discovery Global.

Financing Assurances Called Into Question

A central pillar of WBD's rejection is its deep skepticism regarding the funding behind the Paramount offer. The board raised several critical concerns about the deal's financial underpinnings.

Foremost is the structure of the equity commitment from the Ellison family, which WBD describes as relying on an "opaque revocable trust" rather than a direct guarantee. The board's analysis suggests the actual liability secured may be limited to about $2.8 billion—a figure representing just 7% of the claimed equity contribution for the transaction.

Should investors sell immediately? Or is it worth buying Paramount Global?

Furthermore, WBD highlighted a significant withdrawal from the financing consortium. Affinity Partners, the fund led by Jared Kushner, exited its participation on December 16.

The combined entity's debt profile is another point of contention. WBD projections indicate a merger with Paramount would result in a Debt/EBITDA ratio nearing 6.8x, a leverage level substantially higher than what is implied by the Netflix transaction.

Despite these critiques, Paramount CEO David Ellison maintains the financing package is "airtight." The formal dismissal by the WBD board, however, casts substantial doubt on this assertion.

Strategic Divergence and Forward Path

The two competing visions for WBD's future hinge on differing assessments of synergy potential and risk. Paramount has cited possible synergies around $9 billion, a figure WBD considers overly optimistic. The Netflix deal, in comparison, is associated with a more conservative synergy forecast of $2 to $3 billion. WBD also views its Netflix pact as financially more stable and presenting fewer regulatory hurdles.

The established timeline remains firm. A shareholder vote on the Netflix merger is scheduled for spring or early summer 2026. As long as this binding agreement remains in place and WBD's board does not classify the Paramount offer as a "Superior Proposal," Paramount Skydance finds itself in a challenging negotiating position.