Warner Bros. Discovery recommended on Wednesday that its shareholders reject Paramount’s offer to buy the company and instead accept Netflix’s offer.
According to Warner Bros., an acquisition of Netflix would be better for both the company’s interests and its viewers.
In a letter to its shareholders, Warner Bros. called Paramount’s offer “substandard”, adding that it involved “significant risks and costs” due to its reliance on borrowed funds.
However, Netflix’s offering is backed by a streaming giant worth more than $400 billion (€340 billion).
Warner Bros. said, “We believe that our merger with Netflix represents better, more assured value for our shareholders.”
Warner Bros. agreed to Netflix’s $72 billion offer, which includes both cash and stock, so the latter could purchase its movie studio, as well as HBO’s catalog.
Separation of cable channels from the company
Warner Bros. shareholders will have until Jan. 8 to respond to the proposal, with the company’s board also expressing concerns about the involvement of foreign investors.
Whatever proposal is ultimately accepted is subject to investigation by authorities in the US. Paramount argued that its proposal was more likely to ease the path to approval from authorities.
Warner Bros. would have to sell its cable TV assets, including news outlet CNN and science channel Discovery, which would have to be completed before a potential Netflix purchase.
Critics of the deal say Netflix’s purchase of Warner Bros. would result in the streaming company gaining significant market dominance, a sentiment echoed by U.S. President Donald Trump, who said such a deal “could be a problem.”
Edited by: Dmytro Lyubenko