Warner Bros Discovery Rejects Paramounts "Superior" Offer

Why Warner Bros. Discovery said 'no thanks' to a higher bid — and what it teaches us about maximizing value vs. price

Today Warner Bros. Discovery's board unanimously recommended that shareholders reject Paramount Skydance's unsolicited $30/share all-cash acquisition offer — even though it's higher than Netflix's competing bid — and instead support the previously agreed Netflix merger.

At first glance, this seems counterintuitive. Why reject $30 in cash when Netflix is offering $27.75 (in cash and stock)? But the board concluded that certainty, financing structure, and execution risk matter just as much as headline price.

Here are the key takeaways — lessons that go straight back to valuation fundamentals:
1️⃣ Price is just part of value- A higher offer isn't always superior if the financing structure raises serious questions. WBD's board cited concerns that Paramount has "consistently misled shareholders" about the Ellison family's full financial backstop.
2️⃣ Certainty trumps nominal price- A deal backed by a company with over $400 billion market cap and investment-grade credit can be worth more than a higher-priced offer relying on what WBD called "an unknown and opaque revocable trust."
3️⃣ Board fiduciary duty includes rigorous risk assessment- Boards have a fiduciary duty to "maximize shareholder value". But what does that mean? Boards must evaluate value realization probability, not just headline numbers. WBD's board warned that Paramount's deal would create a highly leveraged entity with 6.8x debt-to-EBITDA and "virtually no current free cash flow."
4️⃣ Strategic context matters- How a deal affects the company's long-term competitive position — and whether it can actually close — influences shareholder value beyond just the purchase price.

As we teach at Ascendant Training, valuation isn't just about a number on a slide, it's about what that number means given financing certainty, execution risk, and strategic context. Today's news is a textbook case of where higher price doesn't always win out.