Board slams funding backstop as unreliable, urges shareholders to reject tender offer

Warner Bros. Discovery's board has unanimously rejected Paramount's hostile $30-per-share all-cash offer, accusing the company of misleading shareholders about the reliability of its funding commitments.

In a sharply worded letter to shareholders, the WBD board took aim at Paramount's claims about the Ellison family backstop. "PSKY has consistently misled WBD shareholders that its proposed transaction has a 'full backstop' from the Ellison family.

It does not, and never has," the board stated. Instead of directly guaranteeing the $40.7 billion equity commitment, the Ellisons are relying on "an unknown and opaque revocable trust" that the board says contains "gaps, loopholes and limitations" that put shareholders at risk.

Paramount's latest offer values WBD at approximately $108 billion and targets all of the company's assets.

The bid has evolved significantly since earlier this year, starting at just $19 per share before climbing to the current $30 through six rounds of offers. Notably, 60% of the equity funding comes from Middle Eastern sovereign wealth funds, including Saudi Arabia's Public Investment Fund, Abu Dhabi's L'imad Holding Company, and the Qatar Investment Authority. Jared Kushner's Affinity Partners withdrew from the investor group this week.

By contrast, Netflix's accepted offer focuses solely on WBD's streaming and studio assets, valuing them at $82.7 billion with a per-share price of $27.75 in cash and stock. Netflix executives welcomed the board's decision and reaffirmed their commitment to theatrical release windows for Warner Bros. films.

Paramount's tender offer remains open until January 8. While securing 51% of shareholder support would give Paramount control, the board's strong opposition makes this an uphill battle. All eyes are now on whether Paramount will sweeten its offer to spark a bidding war.