By Brian Stelter, CNN
(CNN) — Warner Bros. Discovery is officially rejecting Paramount’s buyout offer, calling it “illusory” and arguing that the existing plan to sell most of the media company to Netflix is a better deal for shareholders.
Warner, abbreviated as WBD, is the parent company of CNN. On Wednesday morning, the company filed a formal response to Paramount’s hostile takeover bid launched last week.
The hostile bid “provides inadequate value and imposes numerous, significant risks and costs on WBD,” the board said in a letter to shareholders.
The decision ultimately rests with those shareholders, some of whom have already said that they’ll reject the company’s advice and tender their shares to Paramount for $30 per share.
Executives at Paramount argue that their proposal provides “more value and certainty.”
Executives at WBD say the hostile play is anything but certain.
The fundamental concern raised by WBD is about whether Paramount is “good for the money,” so to speak. The Paramount offer is financed in large part by the royal families of Saudi Arabia, Qatar and Abu Dhabi.
Paramount says it has “air tight financing” and that any suggestion otherwise is “absurd.”
But the WBD side has questioned why Paramount’s current owners are enlisting outside help instead of putting up more of the funds personally.
Earlier this year, David Ellison and his father, Larry, the Oracle billionaire, took control of Paramount after a protracted, politically tainted merger process.
Larry Ellison is worth about $240 billion, according to Forbes’ calculations, making him the third richest man in the world.
Paramount has said that the Ellison family is fully backstopping the bid. Wednesday’s letter from WBD refutes that: “It does not, and never has.”
Foreign financing under scrutiny
In recent days, some US lawmakers have raised alarms about the Middle Eastern financing arrangement.
“This transaction raises national security concerns because it could transfer substantial influence over one of the largest American media companies to foreign-backed financiers,” Reps. Sam Liccardo and Ayanna Pressley wrote in a letter to WBD.
Paramount has said in SEC filings that Saudi Arabia, Qatar and Abu Dhabi have agreed to give up any voting rights and governance role in Warner if the deal goes through. But that, in turn, has intensified questions about why the royal families are seeking to make the investment.
On Tuesday, another financing partner, Jared Kushner’s private equity fund Affinity Partners, withdrew from the process. “With two strong competitors vying to secure the future of this unique American asset, Affinity has decided no longer to pursue the opportunity,” said Affinity, which has a substantial investment from the Saudi sovereign wealth fund.
“We continue to believe there is a strong strategic rationale for Paramount’s offer,” Affinity added in its statement.
The corporate tug-of-war may drag on for months. Paramount’s current offer to buy up shares is set to expire on January 8, but could be extended.
Wall Street analysts say Paramount could come back with a higher bid, file a lawsuit, or take other steps.
Netflix pushes forward
In the meantime, Netflix is moving forward with its plan to swallow up the Warner Bros. movie studio, the HBO Max streaming service and other immensely valuable Hollywood assets.
“We have a solid deal in place,” co-CEOs Greg Peters and Ted Sarandos told employees in an email. “It’s great for our shareholders, great for consumers, and a strong way to create and protect jobs in the industry. We’re confident we’ll get it over the finish line — and we’re genuinely excited about what’s ahead.”
Under the current plan, WBD will split itself into two publicly