The board of Warner Bros. Discovery (WBD) has turned the M&A playbook into a high-stakes poker match. They’re betting they can squeeze a premium out of David Ellison before he realises he is essentially bidding against himself.
In a move that surprised absolutely no one but exhausted everyone, WBD formally rejected the ‘sweetened’ hostile takeover bid from Ellison’s Paramount Skydance. But here lies the multi-billion-dollar catch: they have not slammed the door.
According to reporting from Reuters, the board issued Ellison a one-week ultimatum. He must return with a ‘Godfather offer’ (one they cannot refuse) by 24 February, or the dance is over.
The ‘no’ that means ‘maybe’
The rejection comes just 24 hours after Ellison tabled a revised deal featuring a price bump, governance protections for the studio, and a massive reverse breakup fee.
Apparently, the WBD board looked at the ‘sweeteners’ and decided they were essentially Stevia when they wanted pure cane sugar.
David Ellison has seven days to up the ante. Image: Paramount
Sources close to the negotiations suggest the board demands a price per share starting with a ‘4’, not a ‘3’.
They know Ellison desperately wants to bury the ‘Project Eagle’ PR disaster. This leaked plan to ‘TikTokify’ Paramount+ alienated top Hollywood talent, and the board intends to leverage that desperation for every cent.
While Ellison’s camp privately hinted they could stretch to $31 per share, the WBD board made it clear that figure falls short.
They want a definitive premium that justifies handing over the keys to the kingdom.
Netflix on ice
The real headline, however, lies buried in the minutes of the 17 February meeting. For the first time in months, Netflix no longer appears as the favoured candidate.
Is the dream over? Netflix co-CEOs, Ted Sarandos and Greg Peters on the WBD lot with Zaslav. Image: WBD
Insiders point to a growing shareholder revolt over the proposed ‘Discovery Global’ bad bank structure. The idea of stripping WBD of its premium IP and leaving the carcass of linear cable networks to rot in a separate entity was always risky.
Now, it looks toxic.
Institutional investors reportedly signalled they prefer Ellison’s quick cash over holding stock in a ‘zombie’ cable company while Netflix runs off with Harry Potter. Even Netflix seems to sense the shift.
The streamer granted WBD a waiver to negotiate with Skydance. This move signals they may be ready to walk away rather than overpay.
Ellison’s final exam
This puts Ellison in a precarious but powerful position. The ‘Netflix threat’ that forced him to sweeten his bid earlier this week largely evaporated.
He no longer bids against a rival. He now bids against the board’s ego and their valuation of their own assets.
The board set the deadline. Ellison has seven days to find the bottom of his wallet (or his father Larry’s). If he can bridge the gap between his ‘sweetened’ offer and the board’s ‘Godfather’ expectations, the studio is his.
For WBD, the strategy is clear.
They played the interested parties against each other until one dropped out, and now they squeeze the last man standing. It represents a masterclass in brinkmanship.
Let’s just hope they didn’t overplay their hand and scare off the only buyer left with a chequebook.
The clock is ticking. You have one week, David.
Make it count.