Paramount CEO David Ellison’s quest to acquire Warner Bros. Discovery faced a fresh challenge on Wednesday as the Warner board rejected a $30-a-share bid made directly to shareholders.
Ellison and Paramount have been tirelessly chasing every argument against their bid, insisting they are offering shareholders more money, all cash and a speedier path to the finish line with regulators. But the WBD board continues to disagree, citing its concerns around the bid’s financing and regulatory risk.
Particularly, the board said Wednesday that Paramount Skydance has “consistently misled” WBD shareholders that the $40.7 billion of equity financing in its proposed transaction is fully backstopped by the Ellison family. They argued that using the Ellison family’s revocable trust is “no replacement for a secured commitment by a controlling stockholder” and that its assets and liabilities are “not publicly disclosed and are subject to change.”
The board argued that the bid relies on “the credit worthiness of a $15 billion market cap company with a credit rating at or only a notch above ‘junk’ status from the two leading rating agencies” and that its $9 billion in proposed synergies are “both ambitious from an operational perspective and would make Hollywood weaker, not stronger.”
Additionally, they said that the offer can’t be completed by its current expiration date due to the need for, among other things, global regulatory approvals — and the company and shareholders would face $4.3 billion in costs in the event it doesn’t close. Paramount has maintained its deal would close within a year, while Netflix has said its deal would close in 12 to 18 months.
“Nothing in this structure offers WBD shareholders any deal certainty. The PSKY offer provides an untenable degree of risk and potential downside for WBD shareholders,” the board concluded. “We look forward to moving ahead with our combination with Netflix and delivering the compelling and certain value it will create for shareholders.”
And while the Ellisons have consistently touted their good relationship with President Donald Trump as a plus for Paramount when it comes to regulatory approval, the board’s blow comes after Trump slammed the billionaire owners on Tuesday.
“For those people that think I am close with the new owners of CBS, please understand that 60 Minutes has treated me far worse since the so-called ‘takeover,’ than they have ever treated me before,” he wrote on Truth Social.
“If they are my friends, I’d hate to see my enemies.”
Barely two hours after Trump posted, Jared Kushner’s Affinity Partners also backed out of Paramount’s bid.
These latest developments, combined with skittishness around Paramount’s decision to partner with three Middle Eastern sovereign wealth funds — a move originally seen as a way to curry favor with the White House — signals the tide turning against the Ellisons and towards Netflix’s $82.7 billion deal.
All eyes will now be on Ellison to see if he holds firm at the $30 per share offer or ups the ante with a seventh, increased bid.
But even if Paramount does continue its pursuit of Warner Bros., experts who spoke to TheWrap said securing approval isn’t a “slam dunk” and raised the possibility of a drawn-out legal battle that could take months, if not years, to fully resolve itself, regardless of who wins the bidding war. They also floated the possibility of regulators imposing conditions to address concerns around a combined company’s market concentration, larger impact on the industry or foreign investors’ influence.
“Much would depend on an investigation and ultimately a trial if the merger were challenged,” Tim Wu, a Columbia Law School professor who specializes in antitrust, media and mergers, told TheWrap. “But what is not true is that Paramount is somehow free of serious legal obstacles.”
“This is gonna drag out for quite some time. It’ll probably drag out past the midterms,” former federal prosecutor Naema Rahmani predicted. “I would be shocked if this gets resolved in 2026.”
Representatives for Paramount, Netflix and the Abu Dhabi Investment Authority declined to comment. Representatives for the White House, Affinity Partners, Saudi Arabia’s Public Investment Fund and the Qatar Investment Authority did not immediately return TheWrap’s request for comment. L’imad Holding Company could not immediately be reached.
Middle East investors raise eyebrows
Paramount’s bid includes a total of $40.7 billion in equity financing, including $11.8 billion from the Ellison family and $24 billion from Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and Abu Dhabi’s L’imad Holding Company, according to a filing with the U.S. Securities and Exchange Commission. Kushner’s Affinity Partners had contributed $200 million prior to backing out, according to the New York Times.
The Ellisons and Gerry Cardinale’s RedBird Capital Partners agreed to fully backstop 100% of the equity financing through the Ellison family trust, which contains over $250 billion of assets including 1.16 billion Oracle shares. It also includes $54 billion in committed debt financing from Bank of America, Citibank and Apollo Global Management. Roughly $17 billion has been reserved to allow WBD to extend an existing bridge loan.
In addition to its concerns over the backstop, WBD’s board was worried that the participation of the Middle East funds and China’s Tencent Holdings would create additional regulatory risks and uncertainty by triggering a national security review by the Committee on Foreign Investment in the United States (CFIUS) and potential scrutiny from other non-U.S. regulators.
Tencent would later be dropped as a financing source and the Ellison said that the Middle East funds agreed to forego all governance rights, including board representation. But that didn’t stop Democratic Reps. Sam Liccardo and Ayanna Pressley from urging WBD to file a voluntary notice with CFIUS to conduct a national security review if it opts to reach a deal with Paramount.
A mandatory CFIUS review would be triggered if a foreign entity obtains a 25% or more voting interest in a U.S. company and a foreign government holds a 49% or greater voting interest in that foreign investor, a level that the Middle Eastern funds don’t reach.
But even with a passive stake, Stevens Institute of Technology associate professor of finance Stefano Bonini told TheWrap that the Middle East funds’ involvement is “extremely questionable” given their repeated dealings with the Trump administration and warned there’s “many other ways they can exert their influence.”
In addition to voting interests or ownership stakes, litigation, regulatory and government investigations attorney Braden Perry said that CFIUS reviews can look at “practical influence, access to information, and leverage” and that media and content companies sit in a “sensitive gray zone” due to their control over distribution and consumer data.
“If a foreign investor gets access to non-public strategic information, special veto rights, board observer rights, or any meaningful say over content, data, or technology decisions, CFIUS can treat that as more than a passive stake,” Perry told TheWrap. “Even with a structure marketed as “non-controlling,” the committee has wide discretion to call in the transaction, ask questions, and recommend mitigation, or even effectively block the deal if it sees a national security risk.”
While Perry said a CFIUS review could “slow or chill a hostile bid” from Paramount, he believes it’s more likely that they’d take action to reduce foreign investors’ influence than outright block a deal if the regulatory body gets involved at all.
An individual familiar with the matter told TheWrap that the Middle East funds have “no special information rights or anything of that nature.” A representative for CFIUS did not return TheWrap’s request for comment.
Convincing regulators
Wu argued that both Netflix and Paramount’s bids would be “presumptively illegal” if the combined entity’s control in a particular market exceeds 30%.
If approved, a combined Paramount-WBD would oversee a large portfolio of linear networks, including CBS News, Comedy Central, Nickelodeon, CNN, TNT Sports and HBO, as well as two major film studios and 207 million total streaming subscribers. Together, they would account for 13.8% of TV viewership in the U.S., per Nielsen’s media distributor gauge for September, though they made up just 3.6% of the streaming category’s 46.7% of TV watch time in November.
In addition to winning over U.S. regulators, Paramount and the Ellisons will also have to convince overseas regulators such as the European Commission and U.K. Markets and Competition Authority.
An EC spokesperson confirmed to TheWrap that the Paramount and Netflix deals have not been “formally notified” to them and that it is a company’s responsibility to do so if a transaction “constitutes a concentration and has an EU dimension.” Both Netflix and Paramount have said they’ve filed for Hart-Scott-Rodino (HSR) approval in the U.S. and have announced their cases to the European Commission to begin pre-notification discussions.
Paramount has blasted a Netflix deal as a “blatant attempt” to eliminate one of its “only viable international competitors” in HBO Max. It estimates Netflix accounted for 51% of Europe’s total streaming subscription revenue in 2024, with Disney a distant second at only 10%. It also argues that Netflix faces the hurdle of having to satisfy Europe’s Digital Services Act and Digital Markets Act, which are aimed at protecting consumers from Big Tech overreach.
Netflix has previously argued that its share of TV viewing outside of the U.S. is below 10%. Between 2020 and 2023, the streamer has also invested €6.5 billion ($7.64 billion) in European, non-English series and films.
Morningstar Research analyst Matthew Dolgin told TheWrap that he expects less international pushback against the Paramount deal than the Netflix deal, noting that its streaming market share “should be of no concern at all.”
“Consolidation of studios and networks are our bigger antitrust concerns on the Paramount side,” Dolgin added. “However, we think the dying nature of television networks makes it unlikely that those can be a deal breaker, and the studios concentration should be much more consequential in the U.S. than internationally, because consumers do not directly interact with these American studios overseas.”
Running Point Capital Advisors partner and chief investment officer Michael Ashley Schulman said that while the EC and other international regulators care about whether a combined entity can “strong-arm the ecosystem of labor, distributors, advertisers, creators, or rivals,” an outright block is less likely than a “long procedural grind plus remedies.”
Cristina Caffarra, an economist who worked on multiple competition investigations for M&A deals brought before the EC, told TheWrap to expect overseas regulators to “make noise, look busy, [and] send a lot of information requests.”
She predicted that the EC would conduct an in-depth analysis through a Phase 2 investigation, in which it would have 90 days to review the merger with options for additional 15 and 20-day extensions. But when it comes to approval, she argued that “all that matters here is which way the White House will lean.”
“No one in Europe will remotely do anything that can upset that,” Caffarra added. “So it would all be performative perfunctory.”
The Trump card is backfiring
While the Ellisons’ relationship with Trump has undoubtedly been their strongest regulatory argument, the president has looked to distance himself even before Tuesday’s tirade. Earlier this month, he expressed frustration with CBS’ new owners for airing an interview with Marjorie Taylor Greene and called for CNN to be sold to new ownership in any deal with Warner Bros. Discovery.
Trump previously praised both the Ellisons and Ted Sarandos, but hasn’t formally endorsed Paramount or Netflix, telling reporters at the White House that “neither are particularly great friends of mine.”
Former FCC chief of staff and New Street Research analyst Blair Levin warned against Paramount using the Trump card, arguing it could backfire if its bid faces a legal challenge from Netflix or state attorneys general in court.
If the president were to formally put his thumb on the scale and block the Netflix deal, Levin said the streamer or state attorneys general could argue Trump did so for political or personal reasons and seek evidence, leading to discovery and depositions that could cause delays and other potential collateral damage to a government challenge.
“If Paramount-Skydance wins the proxy battle and the DOJ allows the deal to proceed without a challenge, we think states will sue to block the deal,” Levin added. “We think there is a material risk that the courts will side with the states and block the Paramount-Skydance deal due to concentration in several markets.”
What will Ellison do next?
Warner Bros. Discovery’s rejection of Paramount’s bid was expected — the offer was the same the board had previously received, after all — so Paramount could still stay in the race. At least among some shareholders, Ellison’s hostile bid has gained traction.
GAMCO Investors chairman Mario Gabelli last week told TheWrap that he is “highly likely” to tender his clients’ Warner Bros. Discovery shares, though he acknowledged the battle with Netflix is in the “early innings.” Under the terms of the tender offer, shareholders have withdrawal rights that expire at 5 p.m. ET on Jan. 8, unless the offer is extended.
On its merits, Dolgin said that approval of a Paramount-WBD merger isn’t a “slam dunk,” adding that the federal government isn’t the final arbiter of whether a deal gets approved, rejected, or challenged.
“That said, when shareholders vote, perception is important, and lack of federal challenges are helpful. So we’d still give the edge to Paramount in getting shareholder approval, and we think both Netflix and Paramount could get a deal through,” he said.
Lightshed Partners analyst Rich Greenfield seemed less convinced that Paramount should continue down this path and laid out two alternatives if it abandons the WBD bid: dramatically ramping up its content spend or pursuing a merger with NBCUniversal instead.
“We doubt Paramount is ready to abandon its WBD bid,” said Lightshed Partners analyst Rich Greenfield. “However, with Netflix still having plenty of dry powder and a clear determination to close the transaction, it appears hard to comprehend how Paramount can win and why this is the best use of management’s time and energy.”
Still, Ellison has said his latest offer is not “best and final. He still has the option to raise his offer in an attempt to entice more shareholders and Trump could always change his tune. But the odds, at least for now, have tilted back in Netflix’s favor.
Tess Patton contributed to this report
