In a detailed letter released Wednesday, the WBD board said it had concluded that the tender offer launched by Paramount Skydance (PSKY) on Dec. 8 is “not in the best interests” of WBD shareholders and does not qualify as a “Superior Proposal” under the company’s existing merger agreement with Netflix. The board reiterated its recommendation that shareholders back the Netflix transaction and not tender their shares into the PSKY offer.

In a statement, Netflix said it welcomes the recommendation from the WBD board. The news comes one day after a sudden, blistering attack from President Donald Trump on Paramount, specifically regarding its ownership of CBS News and the flagship newsmagazine 60 Minutes, followed shortly afterward by Trump’s son-in-law, Jared Kushner, withdrawing from the Paramount bidding group.

The WBD letter took pains to argue to shareholders that the board had conducted the process carefully, with the subtext of the Revlon precedent, as Fortune previously reported—a pivotal plank of corporate law for heated takeover battles exactly like this one. In particular, the WBD letter stressed two arguments to shareholders for why it considered the Netflix offer superior: the “illusory” nature of Paramount’s offer and the questionable “backstop” from the Ellison family, which controls Skydance Media. Paramount CEO David Ellison’s father is Oracle cofounder Larry Ellison, the second-richest man in the world, a longtime Republican donor, and a reported friend to President Trump. (The night before, the president implicitly questioned even this: “If they are friends, I’d hate to see my enemies!”)

As Paramount detailed in regulatory filings about its pursuit, the sale process conducted by WBD was itself illusory, as its repeated interest was met with no serious engagement. Paramount told investors today that it continued to believe its bid was never taken seriously. “During the entirety of the sale ‘process’ undertaken by the Warner Bros. board, representatives of Warner Bros. did not provide a single markup of a single transaction document, have a single meeting to go page-by-page through the documents, or engage in a ‘real time’ back-and-forth negotiation with Paramount or its advisors,” Paramount wrote on Dec. 8.

‘Ellison backstop’ called into question, offer deemed ‘illusory’

The WBD letter criticized Paramount’s repeated public assertion that its proposal was backed by a “full backstop” equity commitment from the Ellison family, which controls Skydance Media. “PSKY has consistently misled WBD shareholders that its proposed transaction has a ‘full backstop’ from the Ellison family,” the board wrote. “It does not, and never has.”

The Dec. 8 offer from Paramount worth $30 per share, according to WBD, relies on a $40.65 billion equity commitment with “no Ellison family commitment of any kind,” but on something rather different. “Instead, they propose that you rely on an unknown and opaque revocable trust for the certainty of this crucial deal funding. Despite having been told repeatedly by WBD how important a full and unconditional financing commitment from the Ellison family was—and despite their own ample resources, as well as multiple assurances by PSKY during our strategic review process that such a commitment was forthcoming—the Ellison family has chosen not to backstop the PSKY offer.”

WBD directors warned that a revocable trust is “no replacement for a secured commitment by a controlling stockholder,” stressing that its assets and liabilities are not publicly disclosed, can be changed at any time, and are subject to “gaps, loopholes, and limitations” in the documents provided. The letter adds that even in the event of a willful breach, the trust’s liability for damages would be capped at 7% of its commitment—about $2.8 billion on a $108.4 billion transaction—far below the potential harm to WBD shareholders if the deal failed to close.

The board further criticized PSKY’s tender as “illusory,” pointing out that it explicitly reserves the right to be amended, including on price, or terminated “at any time” before completion and cannot realistically close by its current expiration date given the time required for global regulatory approvals. “Nothing in this structure offers WBD shareholders any deal certainty,” the directors wrote, urging investors to read the company’s Schedule 14D‑9 filing and proxy materials before casting their vote on what could be one of the media industry’s defining transactions.

Netflix deal pitched as safer, richer

Countering David Ellison’s claims that WBD failed to meaningfully engage throughout his pursuit, the WBD board said it prefers the Netflix offer for many reasons, and “none of these reasons will be a surprise to PSKY given our clear, and oft-repeated, feedback on their six prior proposals.”

The board said its preference for Netflix followed a monthslong competitive process launched in October after multiple approaches from PSKY and other suitors, including six formal proposals from Paramount. Directors said they held dozens of meetings and calls, including four in‑person sessions involving WBD chief executive David Zaslav and David and Larry Ellison, and repeatedly alerted PSKY to “material deficiencies” in its bids, but never received an offer that surpassed Netflix’s terms. “After each bid,” the WBD board said, “we informed PSKY of the material deficiencies and offered potential solutions.”

The board framed the Netflix merger as superior because it is a fully financed, binding agreement backed by a company with a market capitalization above $400 billion and an investment-grade balance sheet. Under the Netflix deal, WBD shareholders would receive $23.25 in cash, $4.50 in Netflix stock (within a specified price collar), plus shares in Discovery Global, a new entity that will hold certain WBD assets not acquired by Netflix, giving investors additional upside.

The board emphasized that the Netflix transaction requires no equity financing and is supported by robust debt commitments, while PSKY’s financing depends on the revocable trust and a bidder with a roughly $15 billion market value and a credit rating at or near “junk” status. (Netflix was formerly known as “Debtflix” in the 2010s, when it regularly issued billions’ worth of high-yield bonds to scale its content spending.)

Costs and regulatory issues

WBD warned shareholders that, if completed, the PSKY deal would saddle the combined entity with an estimated 6.8x 2026 debt-to-Ebitda leverage ratio and “virtually no current free cash flow” before synergies. This would result in a “risky capital structure that is vulnerable to even potentially small changes in the PSKY or WBD business between signing and closing.” WBD also warned that the deal would “make Hollywood weaker, not stronger,” as Paramount highlights $9 billion in synergies, to come mostly in the form of job cuts to the two largely similar businesses.

On antitrust and regulatory issues, the board rejected PSKY’s public suggestion that its offer faces less scrutiny than the streaming giant’s deal. After consulting regulatory advisors, WBD concluded there is no material difference in regulatory risk between the two transactions and highlighted Netflix’s agreement to a $5.8 billion reverse break fee—higher than PSKY’s $5 billion—to underscore its confidence in closing.

In its statement, Netflix said it is “highly confident that regulators will see this deal for what it is: pro-consumer, pro-innovation, pro-worker, pro-creator, pro-growth, and pro-competition.” The company reiterated that it expects the deal to close in 12 to 18 months, after customary regulatory approvals. Netflix has submitted its Hart-Scott-Rodino filing, a mandatory premerger notification report submitted to both the Federal Trade Commission and Department of Justice for large deals of this kind. Netflix also noted that its financing structure is not subject to review by CFIUS, or the Committee on Foreign Investment in the U.S., which is an open question given the extent of the Paramount bid’s Middle Eastern funding. Netflix steered shareholders to the website netflixwbtogether.com for more information on the deal.

WBD also argued that the Paramount bid exposes investors to substantial additional costs and downside. If shareholders backed PSKY and the offer ultimately failed, WBD would owe Netflix a $2.8 billion termination fee and forgo a planned debt exchange, triggering an estimated $1.5 billion in extra financing costs—about $4.3 billion, or $1.66 per share, in potential value erosion. Paramount has not offered to reimburse the $2.8 billion termination fee, and has ignored these additional costs in its communications, the board argued. The New York Post’s Charles Gasparino reported that WBD was open to accepting the Paramount offer if it was raised to $35 per share—essentially enough to cover the termination feee.

Editor’s note: The author worked for Netflix from June 2024 through July 2025.