Warner Bros Discovery is poised to tell shareholders to reject Paramount’s $108bn (£81bn) hostile bid, according to reports, clearing the way for Netflix to proceed with its buyout of the Hollywood film and TV group.
The board could announce a decision as early as Wednesday after Paramount Skydance – run by David Ellison and bankrolled by his billionaire father, Larry, who founded Oracle – went directly to shareholders with its rival offer almost two weeks ago.
Netflix had won the auction for the studio and streaming company with an $82.7bn bid a few days earlier – taking control of prize assets including the Harry Potter and DC Comics superhero film franchises, as well as HBO, home to hit shows including Game of Thrones, The White Lotus and Succession.
The streaming company’s deal does not cover WBD’s cable channels, which include CNN, TBS and TNT, which are set to be spun off into a separate company next year.
Despite Paramount tabling a higher all-cash offer to take over all of WBD’s assets, the Financial Times said the board had less confidence in it because it is backed by the Ellison family trust, which is worth close to $250bn in Oracle stock, rather than personally by Larry Ellison.
WBD is expected to focus on four central criticisms of Paramount’s offer, arguing that its value, financing and terms are deficient compared with Netflix’s cash and shares offer, according to reports.
On Tuesday, Affinity Partners, the investment company run by Jared Kushner, Donald Trump’s son-in-law and adviser, pulled out of backing Paramount’s bid.
Paramount has accused WBD’s board of not engaging properly with its offer, prompting the company to go hostile, and has said that it is not its “best and final” deal.
The company has argued that Netflix’s bid is likely to face more regulatory scrutiny, as buying HBO Max will give it dominance in the North American streaming market in particular, while Netflix has argued that if big players such as YouTube are included this is not the case.
Netflix has offered a $5.8bn termination fee, a high amount for a takeover transaction, indicating the streaming company’s confidence it can get the deal through the regulatory process.
There have also been questions raised about whether regulators would object to the high level of funding that Paramount has sourced from sovereign wealth funds in Qatar, Saudi Arabia and Abu Dhabi.
Filings to the US Securities and Exchange Commission show that the three sovereign wealth funds will contribute $24bn, almost 60% of the $40.7bn in equity, twice what the Ellisons are contributing.
Federal Communications Commission ownership rules prevent foreign investors from owning 20% of broadcast or telecoms licensees such as CBS and CNN.
Paramount has said that these rules do not apply in the case of its offer as the wealth funds have agreed to forgo governance rights, including board representation.
WBD and Paramount declined to comment.
