Warner Urges Shareholders to Reject Paramount’s ‘Misleading’ Bid. Netflix Takes Pole Position.

Warner Bros. Discovery urged shareholders to reject Paramount’s offer Wednesday. (Mario Tama/Getty Images)

There’s more drama from Hollywood’s biggest takeover battle. The board of Warner Bros. Discovery urged shareholders to reject an offer from Paramount Skydance on Wednesday, instead recommending that they back Netflix’s rival bid.

Warner’s board said that Paramount had “consistently misled” shareholders by claiming that its offer had been fully backstopped by the Ellison family, which includes Oracle executive chair Larry Ellison and Paramount CEO David Ellison.

“Despite having been told repeatedly by WBD how important a full and unconditional financing commitment from the Ellison family was, the Ellison family has chosen not to backstop the PSKY offer,” Warner’s board wrote in a letter to shareholders.

The board said it was unanimously backing the offer Netflix made on Dec. 5 for Warner’s studios and streaming assets. It added that its agreement with Netflix represents the best value-creating path for shareholders.

Netflix said in a statement that it welcomed the Warner board’s recommendation. Paramount didn’t immediately respond to requests for comment from Barron’s.

Created with Highcharts 9.0.1Source: FactSet

Created with Highcharts 9.0.1Warner Bros. DiscoveryParamount SkydanceNetflixDec. 3Dec. 16-20-15-10-50510152025%

Warner Bros. stock slipped 1.7% to $28.40 on Wednesday, likely on the expectation that the emphatic rejection could put an end to the bidding war. Paramount fell 1.3% to $13.60, and Netflix jumped 1.4% to $95.90.

Netflix’s offer give shareholders $23.25 in cash, $4.50 in shares of Netflix common stock, and additional shares in a spun-out Discovery cable networks business. Paramount’s Dec. 8 hostile bid is for all of Warner Discovery, at $30 a share, and includes a $40.65 billion equity commitment.

Some investors were already worrying about how Paramount would fund the takeover deal. Jared Kushner’s private-equity firm Affinity Partners had been an equity investor in Paramount’s offer, but it said in a statement on Tuesday that it was no longer involved, according The Wall Street Journal. Affinity didn’t immediately respond to a request for comment from Barron’s.

Paramount’s tender offer is set to expire on Jan. 8, so it will have until then to make a decision on whether to improve its bid. The plot twists may not be over just yet.

Write to George Glover at george.glover@dowjones.com