Warner Bros Discovery has told its shareholders to reject Paramount Skydance's $108.4bn (£80.75bn) takeover bid.
Paramount had said its offer was superior to a $72bn deal that Warner Bros struck with Netflix for its film and streaming businesses.
But in a dramatic plot twist in the story of who will take control of one of Hollywood's oldest and most famous movie studios, Warner Bros's board unanimously recommended rejecting the offer and agreed that the deal with Netflix was in the firm's best interests.
The media giant put itself up for sale in October after receiving multiple expressions of interest from potential buyers, including approaches from Paramount Skydance.
On 5 December, Warner Bros Discovery said it had agreed to sell its film and streaming businesses to Netflix.
In a lengthy legal filing, Warner Bros Discovery's board stated that the higher offer from Paramount poses numerous and significant risks, firmly rejecting the idea that the Ellison family — one of America's wealthiest — is financially supporting the bid.
Paramount is backed by the billionaire Ellison family, which maintains close ties with the presidency.
The Warner Bros board emphasized that the offer from streaming giant Netflix is well financed and provides better long-term value to shareholders.
Netflix welcomed the recommendation from Warner Bros. Ted Sarandos, Netflix's co-chief executive, asserted that the merger agreement is superior and in the best interest of stockholders.
In a letter to Warner Bros shareholders, Netflix reiterated that its bid involves a clearer funding structure and carries less regulatory risk.
However, Paramount could still return with a new offer, leaving the Hollywood takeover saga ongoing.
In the week following Netflix’s announcement of its deal to acquire Warner Bros, Paramount Skydance launched a new offer for the entire company, including its television networks.
A takeover of Warner Bros is expected to face scrutiny from competition regulators in both the US and Europe.
The acquisition would provide a new owner with a critical advantage in the competitive streaming market, gaining access to a vast library of films and TV shows, including Harry Potter, The MonsterVerse, Friends, and the HBO Max streaming service.
Some figures within the film industry have voiced concerns regarding the plan to merge Warner Bros with a rival. The Writers Guild of America's East and West branches have called for the merger to be blocked, citing potential reductions in wages and job cuts.
They also argue that the volume of content available for viewers would be diminished.
