In a detailed letter released WednesdayThe WBD board said it concluded that the tender offer launched by Paramount Skydance (PSKY) on December 8 “is not in the best interest” of WBD shareholders and does not qualify as a “Superior Proposal” under the company’s current merger agreement with Netflix. The board reiterated its recommendation that shareholders back the Netflix transaction and not give up their shares in the PSKY offer.

In a statement, Netflix said it accepted the recommendation from the WBD board. The news comes a day after a sudden, blistering attack from President Donald Trump to Paramount, especially regarding its ownership of CBS News and the flagship newsmagazine 60 Minutes, followed immediately by Trump’s son-in-law, Jared Kushner, who withdrew from the Paramount bidding group.

WBD’s letter makes it difficult to argue with shareholders that the board is conducting the process carefully, with the subtext of A dream standard, As luck previously reported—an essential corporate law plank for heated takeover battles like this one. In particular, WBD’s letter highlights two arguments to shareholders as to why it considers Netflix’s offer superior: the “illusory” nature of Paramount’s offer and the questionable “backstop” from the Ellison family, which controls Skydance Media. The father of Paramount CEO David Ellison Oracle founder Larry Ellison, the second richest man in the world, is a longtime Republican donor and a reported friend of President Trump. (Last night, the president no doubt asked even this: “If they are friends, I don’t want to see my enemies!”)

As detailed by Paramount in regulatory filings regarding its pursuit, the sales process conducted by WBD itself was not genuine, as its repeated interest was met with no serious engagement. Paramount told investors today that it continues to believe its bid was never taken seriously. “During the overall sales process conducted by the Warner Bros. board, Warner Bros. representatives did not provide a markup on a transaction document, have a meeting to go over each page of the documents, or conduct a ‘real time’ back-and-forth negotiation with Paramount or its advisors,” Written by Paramount on December 8.

‘Ellison backstop’ questioned, offer deemed ‘illusory’

The WBD letter criticized Paramount’s repeated public statements that its proposal was backed by a “full backstop” equity commitment from the Ellison family, which controls Skydance Media. “PSKY consistently misled WBD shareholders that the proposed transaction had a ‘full backstop’ from the Ellison family,” the board wrote. “It is not, and never was.”

The December 8 offer from Paramount worth $30 per share, according to WBD, relies on a $40.65 billion equity commitment with “no commitment to Ellison’s family of any kind,” but something different. “Instead, they are proposing that you rely on an anonymous and opaque revocable trust for the security of this important financing deal. Despite being told repeatedly by WBD how important a full and unconditional financial commitment from the Ellison family is – and despite their own substantial resources, as well as numerous assurances from PSKY during our strategic review process of family with such a commitment to Ellison – the Ellison family’s preferred review process – not the Ellison family’s Strategic review process.”

The directors of WBD warned that a revocable trust “is no substitute for a sure commitment of a controlling stockholder,” stressing that its assets and liabilities are not disclosed to the public, can be changed at any time, and are subject to “gaps, loopholes and limitations” in the documents provided. The letter added that even if there was an intentional breach, the trust’s liability for damages would be 7% of its commitment – about $2.8 billion in a $108.4 billion transaction – much less than the potential damage to WBD shareholders if the deal fails to close.

The board further criticized PSKY’s tender as “illusory,” pointing out that it apparently has the right to change, including the price, or terminate “at any time” before completion and that it is unrealistic to close its current expiration date due to the time required for global regulatory approvals. “Nothing in this structure offers WBD shareholders any certainty in the deal,” the directors wrote, urging investors to read the company’s Schedule 14D-9 filing and proxy materials before voting on what could be one of the media industry’s biggest transactions.

The Netflix deal was pitched safer, richer

Countering David Ellison’s claims that WBD failed to meaningfully participate in his pursuit, the WBD board said it preferred Netflix’s offer for several reasons, and “none of these reasons will surprise PSKY given our clear, and often repeated, feedback on their six previous proposals.”

The board said its preference for Netflix followed a month-long competitive process launched in October after several approaches from PSKY and other suitors, including six formal proposals from Paramount. The directors said they held several meetings and calls, including four in-person sessions involving WBD chief executive David Zaslav and David and Larry Ellison, and repeatedly alerted PSKY to “material deficiencies” in its bids, but never received an offer that exceeded Netflix’s terms. “After each bid,” the WBD board said, “we inform PSKY of material deficiencies and offer potential solutions.”

The board framed the Netflix merger as superior because it was a fully funded, binding agreement backed by a company with a market capitalization of more than $400 billion and an investment-grade balance sheet. Under the deal with Netflix, WBD shareholders will receive $23.25 in cash, $4.50 in Netflix stock (within a certain price collar), plus shares in Discovery Global, a new entity that will hold some of the assets of WBD that Netflix did not acquire, providing additional leverage to investors.

The board emphasized that the Netflix transaction does not require equity financing and is supported by strong debt commitments, while PSKY’s financing depends on revocable trust and a bidder with a nearly $15 billion market value and a credit rating at or near “junk” status. (Netflix used to be known as “Debtflix” in the 2010s(when it regularly issues billions worth of high-yield bonds to finance its internal spending.)

Costs and regulatory issues

WBD warned shareholders that, if completed, the PSKY deal would saddle the combined entity with an estimated 6.8x 2026 debt-to-EBITDA leverage ratio and “almost no current free cash flow” before synergies. This results in a “risky capital structure that is vulnerable to even minor changes in PSKY or WBD’s business between signing and closing.” WBD also warned that the deal “will make Hollywood weaker, not stronger,” as Paramount promotes $9 billion in synergies, which come mostly in the form of job cuts at both businesses.

On antitrust and regulatory issues, the board rejected PSKY’s public suggestion that its offer would be less scrutinized than the streaming giant’s deal. After consulting with regulatory advisors, WBD concluded that there was no material difference in regulatory risk between the two transactions and highlighted the Netflix deal with a $5.8 billion reverse break payment—higher than PSKY’s $5 billion—to emphasize its confidence in the closing.

In its statement, Netflix said it is “very confident that regulators will see this deal for what it is: pro-consumer, pro-innovation, pro-worker, pro-creator, pro-growth, and pro-competition.” The company reiterated that it expects the deal to close in 12 to 18 months, subject to customary regulatory approvals. Netflix submitted the Hart-Scott-Rodino filing, a mandatory premerger notification report submitted to the Federal Trade Commission and Department of Justice for large deals of this type. Netflix also noted that its financing structure is not subject to review by CFIUS, or the Committee on Foreign Investment in the US, which is a open question given the breadth of funding in the Paramount bid in the Middle East. Netflix guides shareholders on the website netflixwbtogether.com for more information on the deal.

WBD also argued that Paramount’s bid exposed investors to significant additional costs and disadvantages. If shareholders support PSKY and the offer ultimately fails, WBD will owe Netflix a $2.8 billion termination fee and reject a planned debt swap, which would trigger an estimated $1.5 billion in additional financing costs—about $4.3 billion, or $1.66 per share, in potential value erosion. Paramount did not offer to pay the $2.8 billion termination fee, and Paramount did not consider the additional costs of its communications, the board argued. The New York PostCharles Gasparino reports that WBD is open to accepting Paramount’s offer if it is raised to $35 per share—essentially enough to cover the termination fee.

Editor’s note: the author worked for Netflix from June 2024 to July 2025.