Warner Bros. (WBD.US) takes a tough stance in rejecting Paramount's (PSKY.US) proposal, urging shareholders to choose Netflix (NFLX.US) instead, calling Paramount's plan "inferior and dangerous".

According to reports, Warner Bros. Discovery, the parent company of HBO and CNN, is advising its shareholders to reject the hostile takeover bid from Paramount Skydance Corporation (PSKY.US) and instead support its original agreement with streaming giant Netflix (NFLX.US), citing Paramount's offer as "inferior" and "not adequate". After Warner Bros. agreed to sell its streaming and studio businesses to Netflix, the parent company of CBS and Nickelodeon, Paramount, has been directly approaching Warner Bros. shareholders with a bid to acquire the entire company. Warner Bros. plans to spin off cable television networks such as CNN and TNT into separate companies before completing the Netflix deal. Controlled by software billionaire Larry Ellison and his son David, Paramount is competing with global entertainment giant Netflix, aiming to acquire one of Hollywood's most legendary studios Warner Bros. and the crown jewel of the TV business, HBO. Executives from both Paramount and Netflix claim to be the best owners and believe they can enhance their streaming business by leveraging Warner Bros.' coveted library of content. However, Warner Bros. Discovery's board has expressed several concerns about Paramount's takeover bid, including its uncertain financing arrangements and the risk of Paramount potentially terminating the deal at any time. Paramount has offered a cash bid of $30 per share for the entire company, while under the Netflix deal, Warner Bros. shareholders would receive $27.75 in cash plus Netflix stock per share, as well as shares in the new company holding Warner Bros.' cable television networks. The board of Warner Bros. Discovery highlighted risks in Paramount's bid, including the Ellison family's failure to fully support their $40.7 billion equity commitment. In a letter to shareholders on Wednesday, the board expressed that this equity is supported by "an unknown and opaque revocable trust". They stated that Paramount's documents "contain gaps, ambiguities, and limitations that put youour shareholdersand our company at risk." The board noted that Paramount's bid includes restrictions on Warner Bros., such as its ability to refinance debt. The deal also requires Warner Bros. to pay a $2.8 billion termination fee to Netflix. The Warner Bros. Discovery board wrote that Paramount's bid "remains inferior to the merger with Netflix". They unanimously recommended the Netflix deal, stating that "the terms of the Netflix merger are superior" while Paramount's bid "offers inadequate value and imposes significant risks and costs." Netflix sent a letter to Warner Bros. Discovery shareholders on Wednesday, reiterating that its offer is superior and urging them to approve the agreement. Netflix co-CEO Ted Sarandos wrote: "Warner Bros. Discovery's board has reaffirmed once again that Netflix's merger agreement is superior, and our acquisition is in the best interest of shareholders." Warner Bros. Discovery's stock price fell 1.1% in pre-market trading to $28.59. Netflix's stock price rose 1.4%, while Paramount's stock price fell 1.8%. According to regulatory filings, Paramount CEO David Ellison has made multiple unsolicited bids to acquire Warner Bros., with the initial proposal made during a meeting with Warner Bros. CEO David Zaslav on September 14. The board rejected the bid, but Ellison's continued pursuit over the following month, including two raised offers, sparked interest from Netflix, Comcast Corporation Class A, and other undisclosed parties. Approaches from potential bidders prompted Warner Bros. Discovery's board to initiate a strategic review and engage in private negotiations with several suitors. Netflix, Comcast Corporation Class A, and Paramount emerged as the most serious bidders. Zaslav had multiple meetings with David Ellison or his father (co-founder of Oracle Corporation). David Ellison criticized the bidding process, accusing Warner Bros. of unfairly favoring Netflix. However, Warner Bros. portrayed the Ellison family as aggressive and lacking in coherence. The company stated that their bid, submitted after the deadline, failed to address many concerns about their offer and exhibited both threats and enticement towards management. Warner Bros. expressed concerns about the Ellison family's lack of evidence to support their commitment to any deal. In contrast, Netflix addressed every concern of the board. Including assumed debt, Paramount's bid values Warner Bros. at $108.4 billion. Netflix's proposal values the sought-after assets at approximately $82.7 billion, with Warner Bros. investors also gaining from the spin-off of cable television networks. Some shareholders, including fund manager Mario Gabelli, support a competitive auction for Warner Bros., believing that both Paramount and Netflix could increase their bids. Both bids have raised concerns in Hollywood about further industry consolidation and have drawn criticism across the political spectrum. A deal with either party would trigger months-long regulatory reviews. While Paramount insists they have the best chance of obtaining regulatory approval for their deal, Warner Bros. Discovery believes Netflix and Paramount are on equal footing in this regard. The board stated that Paramount's proposed cost cuts "would weaken, not strengthen, Hollywood." Ellison's latest offer includes: $11.8 billion from the Ellison family, $24 billion from three Middle Eastern sovereign wealth funds, and additional financing from Redbird Capital Partners. Investment firm Affinity Partners, founded by President Donald Trump's son-in-law Jared Kushner, has withdrawn from the bidding process on Tuesday.