WBD rejects Paramount offer again in favor of Netflix deal

The Warner Bros. Discovery board on Wednesday once again unanimously recommended that WBD shareholders reject a hostile takeover offer from Paramount Skydance.

The board said it continued to believe the Paramount bid is “inferior” to a previously announced deal with Netflix to buy WBD’s studio and streaming business for $72 billion.

“We have a signed merger agreement with Netflix, it’s a compelling value, a clear path to closing and protections for our shareholders if something stops the close, whatever that might be,” WBD board Chairman Samuel Di Piazza told CNBC’s David Faber on “Squawk Box” on Wednesday morning.

In the days following the announcement of that deal, Paramount launched its hostile bid, taking directly to shareholders an offer of $30 per share, all cash for the entirety of Warner Bros. Discovery, including its TV networks.

WBD’s board made an initial recommendation to reject the offer, and Paramount subsequently made another push for the coveted assets. In late December Paramount guaranteed the backing of billionaire Larry Ellison, the father of Paramount Skydance CEO David Ellison, as a clear response to questions raised by WBD’s board.

Di Piazza previously told CNBC that the board had concerns about the backing of Oracle co-founder Larry Ellison.

In an amended offer late last year, Paramount said Larry Ellison had agreed not to revoke the family trust or adversely transfer its assets during a pending transaction. However, Paramount Skydance stopped short of upping the amount of its bid.

“PSKY has repeatedly failed to submit the best proposal for WBD shareholders despite clear direction from WBD on both the deficiencies and potential solutions,” the WBD board said in a letter to shareholders Wednesday.

“The WBD Board, management team and our advisors have extensively engaged with PSKY representatives and provided it with explicit instructions on how to improve each of its offers. Yet PSKY has continued to submit offers that still include many of the deficiencies we previously repeatedly identified to PSKY, none of which are present in the Netflix merger agreement, all while asserting that its offers do not represent its ‘best and final’ proposal,” the board continued.

In a Thursday response, Paramount Skydance reiterated its $30-per-share offer, once again arguing it is superior to Netflix’s deal based on the estimated value of the Discovery Global networks business.

“Our offer clearly provides WBD investors greater value and a more certain, expedited path to completion. Throughout this process, we have worked hard for WBD shareholders and remain committed to engaging with them on the merits of our superior bid and advancing our ongoing regulatory review process,” David Ellison said in a statement.

Paramount first showed interest in acquiring all of Warner Bros. Discovery’s assets in September. The company made three takeover offers before Warner Bros. Discovery kicked off a formal sale process, inviting other bidders into the fold.

In a Wednesday letter to members of the WBD board, Pentwater Capital Management CEO Matthew Halbower said the board has “made an error” in not engaging with Paramount’s revised bid.

Pentwater is WBD’s seventh largest shareholder.

“Paramount has offered a $30 per share that is economically superior, it is superior in terms of regulatory risk, and I understand the board has some legitimate issues with it, but those legitimate issues don’t warrant giving Paramount the stiff arm and refusing to actually have a conversation,” Halbower told Faber Wednesday morning. “That’s not how I want my board of directors to act.”

Halbower’s letter argues that the board’s reasons for not engaging with Paramount’s bid were insufficient and that the board has “breached its fiduciary obligations” to its shareholders.

“We are a small voice, but I think it’s important for the board to at least hear our voice as the seventh largest shareholder, because I think what they are doing is wrong,” Halbower said on CNBC. “If Paramount goes away, then it is a lost opportunity.”

Netflix issued its own statement on Wednesday welcoming the WBD board’s recommendation and noting it has been engaging with the U.S. Department of Justice and European Commission on antitrust concerns surrounding the merger.

“The WBD Board remains fully supportive of and continues to recommend Netflix’s merger agreement, recognizing it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry,” Netflix co-CEOs Ted Sarandos and Greg Peters said in the statement.