Warner Bros. rejects Paramount deal, but the Netflix merger drama is only just beginning

• Warner Brothers Discovery just rejected Paramount's buyout offer
• The WBD board favors the Netflix deal
• Don't expect a closed deal any time soon

Last week, it looked like Paramount might swoop in to steal Warner Bros. Discovery from Netflix with a hostile takeover bid that trumped the streaming giant’s offer, but now it seems WBD is sticking by its Stranger Things paramour.

That’s because the WBD board has officially rejected the bid from David Ellison’s Paramount, calling it “inadequate, with significant risks and costs imposed on our shareholders” (via The Hollywood Reporter).

Their complaints centered on two key issues.

The first is WBD has doubts Larry Ellison – David Ellison’s father, who is helping to finance the Paramount deal – can provide the full backstop that Paramount’s offer claims he can. Essentially, Larry Ellison is offering up a trust with assets and liabilities as a guarantor to Paramount’s deal, but because the deal doesn’t disclose what these assets are and because assets within the trust can be moved or changed, WBD isn’t convinced this can serve as a reliable backstop.

The second is over the involvement of Middle East sovereign funds. While the Ellisons’ involvement would arguably help to grease the regulatory wheels – as Larry is a close ally of President Donald Trump – the fear is that the money from Saudi Arabia, Abu Dhabi, and Qatar would just undo that political goodwill, as US lawmakers may not be keen to have these foreign powers so heavily involved with such a significant entertainment provider.

It likely doesn’t help that Jared Kushner’s investment fund (Kushner is Trump’s son-in-law) has also pulled out its financial support as part of the Paramount deal.

WBD added that on top of this financial and regulatory uncertainty, it doesn’t believe the Paramount deal is materially better than Netflix’s offer. It sees it as more risk for no gain.

Netflix has also sent a letter to WBD shareholders to explain why its offer is “superior on multiple fronts.”

Far from the climax

While this sounds like the end of the story, it almost certainly isn’t.

For a start, WBD’s board doesn’t have the final say on the Paramount offer: its shareholders do. While WBD's board has said in a letter to shareholders that Netflix's deal is superior, shareholders could still decide to sell their stake to Paramount.

Even if they agree with the board’s assessment, Paramount may not back down.

Reports suggest David Ellison texted WBD CEO David Zaslav that Paramount could be willing to go above $30 a share, saying, “Please note importantly, we did not include ‘best and final’ in our bid.”

Equally, if Paramount’s consortium does come back with a better offer, Netflix could respond with an even bigger buyout agreement of its own. The dips in both Netflix and Paramount’s stock prices suggest markets predict a bidding war.

It’s also worth noting that while a lot of focus is on the US Government’s thoughts on the deals – especially given Trump’s close personal ties to the Ellisons and his unprecedented promise of wanting to be directly involved in the decision-making process over the deal – the US likely won’t be the only government to weigh in. The EU will be weighing in too, and its commission doesn’t seem to boast the same personal affinity for the Ellisons.

There’s still time for more to happen in 2025, but I expect the biggest developments won’t happen until 2026 – giving us plenty more time to watch how this drama unfolds. Personally, I can’t wait for the Netflix-made dramatization of it all.

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