WBD’s board of directors asks shareholders to reject Paramount Skydance takeover bid

the Warner Bros. Discovery The board said on Wednesday that it had unanimously recommended that WBD shareholders reject the takeover offer from… Paramount Skydance And stick to the “superior” proposal of Netflix.

Last week, Paramount launched a hostile bid for WBD, taking an all-cash offer of $30 a share directly to shareholders. Paramount Skydance CEO David Ellison said the deal, which equates to an enterprise value of $108.4 billion, is better than the Netflix deal and that the Paramount-WBD combination would have better chances of winning regulatory approval.

“After carefully evaluating Paramount’s recently launched tender offer, the Board of Directors has concluded that the value of the offer is insufficient, while imposing significant risks and costs on our shareholders,” Samuel Di Piazza, chairman of Warner Bros. Discovery, said in a press release. “We are confident that our combination with Netflix represents superior value and certainty for our shareholders, and we look forward to delivering the compelling benefits of our combination.”

The formal rejection, which was expected, would likely pave the way for a new, higher offer from Paramount. Ellison told CNBC last week that he had already informed WBD CEO David Zaslav that the $30-per-share offer was not the company’s “best and final” offer. Paramount could announce a new offer aimed directly at shareholders at any time.

If Paramount raised its offer, WBD indicated in its rejection that it wanted more financing to come directly from the Ellison family.

WBD’s board noted that Paramount’s offer included more than $40 billion in financing separate from the Ellison family despite Paramount’s claim that the financing had the “full support” of the family. On Tuesday, Jared Kushner’s Affinity Partners exited the bid, which also includes nearly $24 billion from Gulf sovereign wealth funds.

“Despite its ample resources – as well as multiple assurances by PSKY during our strategic review process that such a commitment was imminent – the Ellison family has chosen not to support PSKY’s bid,” the board said in a letter to shareholders.

Di Piazza told CNBC’s David Faber on “Squawk Box” Wednesday morning that the board would have appreciated more involvement from Ellison’s father, billionaire Oracle co-founder Larry Ellison.

“We were not confident that one of the richest people in the world would be present at the closing,” Di Piazza said. “Making a deal is great, closing a deal is even better.”

Netflix has proposed a cash-and-stock deal for WBD’s streaming and studio assets, with an equity value of $72 billion or an enterprise value of about $83 billion, including debt. Under the deal, Warner Bros.’ cable network portfolio will be split. Discovery into a separate entity.

“Netflix made a compelling offer, which was significant cash, confirmation of closing, high termination fees, and they responded to the operating issues we were concerned about,” Di Piazza told CNBC. “PSKY had every opportunity to address this broad range of issues, but they chose not to do so.”

WBD noted that Netflix’s bid “does not need any equity financing and aggressive debt commitments,” given Netflix’s market valuation of more than $400 million.

“It wasn’t a difficult choice,” Di Piazza told CNBC.

He also dismissed antitrust questions surrounding both proposals: “Either of these deals can get done. Both of these deals will have to work their way through [Department of Justice]”.

Di Piazza said the company will hold a shareholder vote in the spring or early summer, though he said a date has not yet been set.

Mario Gabelli, CEO of GAMCO Investors and a WBD shareholder, told CNBC’s Becky Quick on Wednesday that while he had previously been leaning toward Paramount’s bid, “the most important part is keeping it on track,” hoping to get more from both bidders.

Netflix said on Wednesday that it “welcomes” the Warner Bros. board’s recommendation. Discovery.

“This was a competitive process that achieved the best outcomes for consumers, creators, shareholders and the broader entertainment industry,” Netflix co-CEO Ted Sarandos said in a statement. “Netflix and Warner Bros. complement each other, and we are excited to combine our strengths with our theatrical film division, global television studio, and the iconic HBO brand, which will continue to focus on premium television.”

The board’s recommendation sends a “very clear message,” Netflix co-CEO Greg Peters told CNBC on Wednesday.

“Our deal structure is clean, that’s for sure, we’re a large-cap company… we have a strong investment-grade balance sheet,” Peters told Squawk Box.

Likewise, he dismissed antitrust questions, saying U.S. TV viewership remains competitive and that the audiences for Netflix and HBO Max’s streaming services are complementary.

Peters said that if regulators sued Netflix, it would fight for the deal: “We have a good case, and we believe we should defend and support that case vigorously.”