Warner Bros. Slips as Board Prepares to Reject Paramount Offer
Shares fall after reports suggest the board will advise against a $30-per-share hostile bid, citing concerns over financing and valuation.
Warner Bros. Discovery Inc. (NASDAQ: WBD) shares declined Tuesday after reports emerged that the company's board is preparing to formally reject a hostile tender offer from rival Paramount Global.
The stock fell 2.73% to $28.90 in afternoon trading, retreating from a 52-week high of $30.00. The drop reflects investor skepticism about the deal's prospects following news that Warner Bros. has significant reservations about the bid.
According to reports from Bloomberg and The Wall Street Journal, Warner's board is readying a recommendation for shareholders to turn down the unsolicited $30-per-share offer. The primary concerns reportedly center on the structure of the financing for the acquisition and the overall terms of the deal.
The proposed offer implies an enterprise value of approximately $108.4 billion for Warner Bros. Discovery. However, the board's reported stance suggests it does not view this valuation as compelling enough to outweigh the risks associated with the offer's conditions. With a current market capitalization of approximately $74.3 billion, the bid represents a significant premium, but the financing questions appear to be a major sticking point.
This development introduces considerable uncertainty into what would be a transformative merger for the media industry. A combination of the two giants would bring brands like Warner Bros. film studio, HBO, CNN, and the Discovery networks under the same roof as Paramount's film studio, CBS, and a suite of cable networks. Such a move has been seen by analysts as a potential response to the intense competition and consolidation pressures within the streaming and traditional media landscape.
The hostile nature of the tender offer, made directly to shareholders without prior agreement from the target's board, already presented a contentious path forward. The board's formal rejection would escalate the battle, forcing Paramount to either improve its terms or attempt to win over shareholders in a proxy fight.
For Warner Bros. Discovery shareholders, the board's impending action casts doubt on a quick payday at the $30 offer price—a level the stock was just shy of reaching on its own merit. The market's negative reaction indicates that investors are now pricing in a lower probability of the acquisition being completed under the current proposed terms.