Warner Bros Discovery (WBD) is preparing to urge shareholders to reject a $108bn (£81bn) hostile takeover bid from Paramount, after one of its key financial backers pulled out of the deal.
Affinity Partners, the investment firm owned by Jared Kushner, said it would no longer support Paramount’s offer, citing a shift in circumstances.
“The dynamics of the investment have changed significantly”, a spokesperson told NBC News.
The withdrawal forms a blow to Paramount’s financing package, which also includes backing from sovereign wealth funds in Saudi Arabia, Qatar and Abu Dhabi.
WBD’s board is expected to formally recommend rejecting the bid as early as this week, according to reports.
Paramount went directly to shareholders last week with an all-cash offer of $30 per share, valuing WBD at $108bn and offering roughly $18bn more in cash than a rival deal agreed with Netflix.
That move bypassed WBD’s board and escalated the contest into a full-blown hostile takeover.
Netflix deal moves forward
Warner Bros executives are understood to be in favour of Netflix’s $72bn agreement.
Signed two weeks ago now, the deal values the company’s film studios, TV production arm, and HBO Max services at $82.78bn, including debt.
Under the terms, Netflix would pay $23.25 in cash, as well as $4.50 in stock per share.
The remaining Discovery-owned linear TV networks would be spun off into a separate business.
If completed, the Netflix transaction would give the streaming giant control of blockbuster franchises like Harry Potter and Game of Thrones, strengthening its hand in an increasingly competitive market.
Meanwhile, Paramount has argued its bid offers greater certainty and a faster route to completion, while claiming Netflix’s deal faces higher regulatory risk.
The proposed Paramount tie-up would combine rival US broadcasters CBS and CNN under a single owner, meaning it could still face scrutiny from the Department of Justice’s antitrust division.
WBD’s board is expected to counter that Paramount’s financing is less secure, particularly following Affinity’s exit, and that Netflix’s offer includes a $5.8bn break-up fee – a sign of confidence it can clear regulatory hurdles.
WBD shares have been trading just below Paramount’s offer price, suggesting investors may be betting on an improved bid.
People close to the board say it remains open to a revised proposal from Paramount if funding concerns are addressed and the valuation increases.