Warner Bros. Discovery Board Rejects Paramount Bid, Backs Netflix Merger

The board of directors at Warner Bros. Discovery has formally rejected a hostile takeover proposal from Paramount Skydance, citing significant concerns over its financing. Instead, the board is unanimously recommending that shareholders approve a previously announced, binding agreement with Netflix. This pivotal decision appears to hinge less on the offered price and more on the practical execution risks associated with the rival bid. The move has immediate implications for shareholders and reshapes the ongoing consolidation dynamics within the media sector.

Management and the board are advocating for the combination with Netflix, which they describe as a more sustainable long-term strategy. The deal structure involves a mix of cash and Netflix stock for shareholders, alongside the planned spin-off of a new entity tentatively named "Discovery Global." This separate company would house the linear television assets, including networks like CNN and Discovery.

Company leadership argues that leveraging Netflix's dominant global distribution platform combined with the premium content from HBO and Warner Bros. offers a stronger future than a merger primarily focused on cost synergies within the declining linear TV business. Market reaction seems to align with this assessment; Warner Bros. Discovery shares closed at €23.70 on Friday, trading near the value implied by the Netflix deal and signaling investor skepticism that Paramount's higher offer can be completed.

Financing Shortfalls Sink Paramount's Proposal

The board labeled Paramount Skydance's offer of $30 per share as "inferior," specifically criticizing its funding as "illusory." A critical turning point was the withdrawal of committed financing from Affinity Partners, the private equity firm led by Jared Kushner. This left the proposal relying heavily on a revocable trust from the Ellison family, an arrangement the board determined introduced unacceptable execution risk.

Should investors sell immediately? Or is it worth buying Warner Bros. Discovery (A)?

Further diminishing the appeal of the nominal price are the substantial break-up costs that would be triggered if shareholders pursued the Paramount deal. A termination fee payable by Warner Bros. Discovery is estimated at approximately $2.8 billion, with additional financing expenses adding roughly $1.5 billion. These costs would significantly erode the value of the higher per-share offer.

Shareholder Vote and Market Signals Ahead

The next major milestone is a scheduled shareholder vote on the Netflix transaction in the spring of 2026. The path until then remains uncertain, as Paramount's active tender offer is still outstanding. Market participants are advised to watch for two key price levels in the stock:
* A sustained breakout above $28.50 would suggest that arbitrage traders or potential bidders believe improved financing for Paramount or a higher competing offer is likely.
* Conversely, a decline below $27.00 could reflect growing concerns that regulatory scrutiny, such as a potential antitrust review by the U.S. Department of Justice, or other obstacles might jeopardize both transactions.

The core takeaway: The Warner Bros. Discovery board has dismissed the Paramount bid due to concrete financing risks, endorsing the Netflix merger as a more stable and executable alternative. The final decision now rests with shareholders, with a vote set for spring 2026.