The Gulf's Hollywood gambit unravels

The Gulf states' unprecedented alliance to claim a stake in Warner Bros. Discovery ended this week not with a dramatic counterbid, but with a quiet unraveling. Jared Kushner's Affinity Partners withdrew from Paramount's $108 billion hostile offer on Tuesday. The next day, Warner Bros. Discovery's board unanimously rejected the bid, accusing Paramount of misleading shareholders about its financing and urging investors to stick with Netflix's "superior" proposal.

The collapse came faster than anyone anticipated, and the Trump factor, which Paramount had hoped would be an asset, may have accelerated it.

Warner Bros. Discovery's board issued a blistering letter to shareholders on Wednesday, calling Paramount's offer "illusory" and its financing commitments riddled with "gaps, loopholes and limitations." The central accusation: despite repeatedly claiming that the Ellison family would fully backstop the $40.7 billion equity portion of the deal, no such commitment ever existed.

The board pointed to a critical detail buried in Paramount's filings. The equity backing came from the Lawrence J. Ellison Revocable Trust, a vehicle whose assets and liabilities are not publicly disclosed and can be modified at any time. "A revocable trust is no replacement for a secured commitment by a controlling shareholder," the board wrote.

Samuel Di Piazza, the WBD board chair, was blunter on CNBC: "We were not confident that one of the richest people in the world would be there at closing. Doing a deal is great; closing a deal is better."

Netflix's bid, by contrast, requires no outside equity financing. The streaming giant has a market cap exceeding $400 billion and an investment-grade balance sheet. "It was not a hard choice," Di Piazza said.

The first sign of collapse came Tuesday, when Affinity Partners announced it was withdrawing from the consortium.

"With two strong competitors vying to secure the future of this unique American asset, Affinity has decided no longer to pursue the opportunity," the firm said in a statement. "The dynamics of the investment have changed significantly since we initially became involved in October."

The timing was notable. Just hours earlier, President Trump had publicly attacked Paramount and the Ellisons on Truth Social, complaining that CBS's 60 Minutes "has treated me far worse since the so-called 'takeover' than they have ever treated me before." He added: "If they are friends, I'd hate to see my enemies!"

Kushner's involvement had drawn significant attention, and criticism, from the moment it became public. Democratic lawmakers cited his firm's reported $2 billion backing from Saudi Arabia's Public Investment Fund, controlled by Crown Prince Mohammed bin Salman, as a national security concern. Some analysts had viewed Kushner's participation as a political signal rather than a financing necessity, a way to telegraph regulatory goodwill from an administration led by his father-in-law.

Trump's outburst disrupted that calculus. By publicly distancing himself from Paramount, the president stripped the bid of its most implicit advantage: the perception of a clear path through regulatory review.

The three sovereign wealth funds that had committed $24 billion to Paramount's bid, Saudi Arabia's Public Investment Fund, Abu Dhabi's L'imad Holding Company, and the Qatar Investment Authority, have not publicly withdrawn. But with the WBD board's rejection and Kushner's exit, their pathway to a stake in Warner Bros. appears closed, at least for now.

Paramount said Wednesday it would not increase its offer yet, though David Ellison indicated the $30-per-share bid was never intended to be final. The tender offer remains open until January 8, theoretically allowing Paramount to persuade a majority of WBD shareholders to tender their shares directly. But without board support, and with the Ellison financing structure under sustained attack, that outcome appears unlikely.

The Gulf funds had structured their participation specifically to avoid a Committee on Foreign Investment in the United States (CFIUS) review, agreeing to forgo all governance rights including board seats and voting power. But the WBD board's concerns about financing certainty proved more decisive than any national security questions.

For the Gulf states, the failure represents a missed opportunity rather than a strategic setback. PIF, QIA, and Abu Dhabi's newer investment vehicles remain flush with capital and hungry for Western entertainment assets. The $55 billion Electronic Arts deal, which also involved PIF, Kushner's Affinity, and Silver Lake, continues to move toward completion. And Gulf sovereign funds have made clear their entertainment ambitions extend far beyond any single transaction.

Netflix co-CEO Ted Sarandos called Wednesday's news "a competitive process that delivered the best outcome for consumers, creators, stockholders, and the broader entertainment industry." His co-CEO Greg Peters described the deal structure as "clean" and "certain."

Under the Netflix agreement, the streaming giant would acquire Warner Bros. Discovery's film and television studios, HBO, and HBO Max for $27.75 per share, a combination of cash and stock with an enterprise value of roughly $83 billion. WBD's cable networks, including CNN and TNT Sports, would be spun off into a separate entity called Discovery Global.

Di Piazza said a shareholder vote is expected in spring or early summer 2026. Both deals still require regulatory approval, and Trump has inserted himself into that process, saying he will "be involved" in any decision. The Department of Justice will review whichever transaction moves forward.

Di Piazza dismissed the notion that one deal faced meaningfully greater antitrust risk than the other. "Either of these deals can get done," he said. "Both of these deals will have to fight their way through the DOJ."

The Warner Bros. saga offered a test case for Gulf sovereign wealth's ability to participate in transformational American media deals. The answer, at least this time: not like this.

The structure Paramount assembled, seven funding partners across three continents, including three rival Gulf states cooperating on a single hostile bid, created precisely the complexity and uncertainty the WBD board cited in its rejection. Netflix offered one counterparty with a fortress balance sheet. Paramount offered a coalition that began losing members before the board even voted.

The political dimension proved equally unstable. Kushner's involvement, intended to signal alignment with the administration, instead drew scrutiny from Capitol Hill Democrats and ultimately became a liability when Trump turned on Paramount over unrelated grievances about CBS News coverage.

For Gulf sovereign funds seeking American entertainment assets, the lesson may be that the path runs through simpler deal structures and less politically charged targets. The $55 billion Electronic Arts transaction, a take-private with no hostile dynamics, no competing bidder, and no cable news networks to inflame presidential sensitivities, offers a different template.

Warner Bros. Discovery, with its century of cinematic history and its portfolio of globally recognized IP, would have been a crown jewel. Instead, HBO, Harry Potter, and the DC Universe appear headed to Netflix.

Paramount's tender offer technically remains open. David Ellison could still return with a higher bid backed by more certain financing. But the Gulf alliance that made his hostile offer possible has already begun to fracture, and the board that needed convincing has made clear it wasn't impressed.