Netflix Blasts ‘Ongoing Distraction’ From Paramount as Warner Bros. Asks for David Ellison’s ‘Best and Final’ Offer

Netflix took aim at Paramount on Tuesday after Warner Bros. Discovery said it would give David Ellison until Feb. 23 to submit his “best and final” offer for the entire company.

“Throughout the robust and highly competitive strategic review process, Netflix has consistently taken a constructive, responsive approach with WBD, in stark contrast to Paramount Skydance (PSKY),” Netflix said in a statement. “While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics.”

“Accordingly, we granted WBD a narrow seven-day waiver of certain obligations under our merger agreement to allow them to engage with PSKY to fully and finally resolve this matter,” the streamer continued. “This does not change the fact that we have the only signed, board-recommended agreement with WBD, and ours is the only certain path to delivering value to WBD’s stockholders.”

Netflix reiterated that its deal with Warner Bros. would “deliver more choice and greater value to audiences worldwide with expanded access to exceptional films and series – both at home and in theaters.”

It also said the deal “is centered on growth, opportunity, and a reinforced commitment to creating world-class films and television – not consolidation and layoffs” and would expand production capacity, increase its investment in original content and create jobs.

Additionally, Netflix expressed confidence that its deal with Warner Bros. has a “clear path to timely regulatory approval.” It has already submitted its Hart-Scott-Rodino (HSR) filings and is engaging constructively with competition authorities across the world, including the U.S. Department of Justice (DOJ), state attorneys general, the European Commission, and the U.K. Competition and Markets Authority (CMA).

At the same time, Netflix blasted Paramount, arguing it has “repeatedly mischaracterized the regulatory review process by suggesting its proposal will sail through, misleading WBD stockholders about the real risk of their regulatory challenges around the world.” For example, the company noted that it received clearance from foreign investment authorities in Germany on Jan. 27 — the same day as Paramount.

It also said that the foreign funding backing Paramount-Skydance’s bid is “already raising serious national security concerns” and that it expects the Committee on Foreign Investment in the United States (CFIUS), Team Telecom in the U.S. and European authorities to scrutinize Paramount’s backing from Middle Eastern investors.

“In reality, PSKY is far from obtaining all of the regulatory clearances required,” the company said. “Enforcers will focus on the impact of PSKY’s proposal on competition, job losses, reduced output, and downward pressure on wages for film and television workers.”

Netflix also warned that the Paramount offer would create “significant horizontal overlaps” that will concern antitrust enforcers, including combining two of the five major Hollywood studios, two major theatrical distribution channels, two of the major TV studios, two major news networks and two major sports distributors.

Additionally, the streamer argued that Ellison’s “aggressive financing package, rapid deleveraging plans, and performance track record pose tremendous risks to both the completion of their proposed deal and the industry” and that Paramount would be over-leveraged with approximately $84 billion in debt and a roughly 7 times leverage ratio.

In order to hit the midpoint of its deleveraging targets, Netflix said it would need to realize roughly $16 billion of cost savings — far in excess of its previously disclosed $6 billion synergy figure — through “greater, even deeper job
cuts that would irreparably harm the entertainment industry.” It added that Paramount is undershooting its guidance for 2026 adjusted operating income by 15%, which could mean even more cost cuts.

“This extraordinary execution risk and track record of operational underperformance could impact PSKY’s ability to fund and close a transaction,” the company concluded. “A business plan that is dependent upon $16 billion in cost savings should be an unmistakable red flag for regulators, policymakers, union leaders and creatives.”

The reopened negotiations come after Paramount submitted its ninth bid for the entire company last week, which includes $43.6 billion of equity commitments from the Ellison family and RedBird Capital Partners and $54 billion of debt commitments from Bank of America, Citigroup and Apollo. Oracle co-founder Larry Ellison has also made an irrevocable personal guarantee towards $43.3 billion of the equity financing as well as any damage claims against Paramount.

It also includes a 25 cent per share “ticking fee,” which is the equivalent of approximately $650 million cash value that would be paid to shareholders for every quarter the transaction is not closed beyond Dec. 31, 2026. The company has also committed to funding a $2.8 billion termination fee payable to Netflix, as well as other debt financing commitments. Additionally, Paramount said it is open to discussing “contractual solutions to account for the possibility of continuing deteriorating financial performance beyond what WBD is currently projecting for its linear network business.”

Following the receipt of the offer, Paramount also notified WBD’s board that it would agree to pay $31 per share if they reopened sales talks, but emphasized that it isn’t Ellison’s “best and final” proposal.

In a letter responding to Paramount, the WBD board said that the latest amended offer addresses some of its concerns, but still contains “many of the unfavorable terms and conditions” that were submitted in Ellison’s previous bids. It added that while Ellison has expressed a willingness to address those concerns, Paramount does not do so in the latest offer, leaving the company with “vague assurances of intention.”

“We seek your best and final proposal. To be clear, our Board has not determined that your proposal is reasonably likely to result in a transaction that is superior to the Netflix merger,” the letter concludes. “We welcome the opportunity to engage with you and expeditiously determine  whether [Paramount Skydance] can deliver an actionable, binding proposal that provides superior value, transaction certainty and interim protection for WBD’s businesses to Warner Bros. Discovery shareholders.” 

Netflix retains the right to match any counter offer from Paramount. Shareholders are set to vote on the Netflix deal at a special meeting on March 20 at 8 a.m. ET. Shareholders of record as of Feb. 4 at 5 p.m. ET will be entitled to vote at the meeting.

WBD shares popped 2.9% in pre-market trading on Tuesday following the announcement, while Paramount shares rose 3.2% and Netflix shares were up by 0.49%.

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