Warner Bros Discovery in $108B takeover showdown
Paramount's $30/share bid faces Netflix deal in proxy battle as DOJ reviews both transactions
Warner Bros. Discovery shares climbed 1.5% to $27.61 on Tuesday as investors weighed an enhanced $30 per share hostile takeover bid from Paramount Skydance against a competing transaction with Netflix that faces mounting regulatory scrutiny.
The media conglomerate finds itself at the center of one of Hollywood's most consequential takeover battles, with Paramount Skydance sweetening its all-cash offer to $108.4 billion on February 10. The revised proposal includes a quarterly "ticking fee" of $0.25 per share that would begin accruing in January 2027 if the transaction fails to close by December 31, 2026. Paramount has also committed to covering Warner Bros. Discovery's $2.8 billion termination fee to Netflix and eliminating $1.5 billion in potential debt financing costs.
"This represents a clear positive for WBD," analysts at KeyBanc Capital Markets wrote, noting that any deal would need to provide significantly better value than the company's post-spin valuation. The firm suggested regulatory challenges could be addressed through divestitures, potentially including CNN.
Paramount's bid, backed by $43.6 billion in equity commitments from the Ellison family and RedBird Capital Partners alongside $54 billion in debt financing, stands in stark contrast to Netflix's existing agreement for WBD's streaming and studios division at $27.75 per share. That transaction, valued at $82.7 billion, would spin off WBD's Global Linear Networks division as Discovery Global.
Warner Bros. Discovery's board has unanimously approved the Netflix deal and previously rejected Paramount's initial $30 offer as "inadequate" and "illusory." However, the board's recommendation has not stopped Paramount from escalating its campaign. The company has filed a lawsuit seeking more information on WBD's deal with Netflix and launched a proxy fight to solicit shareholder votes against the Netflix transaction at an upcoming special meeting.
The timing creates a complex decision matrix for investors. Paramount's tender offer expires March 2, while WBD shareholders are expected to vote on the Netflix proposal by April. Adding to the uncertainty, both transactions face regulatory reviews. Paramount certified compliance with the Department of Justice's "second request" for information on February 9, initiating a 10-day waiting period, and secured foreign investment clearance in Germany on January 27.
Netflix's deal faces more significant regulatory hurdles. The DOJ has launched an antitrust investigation examining whether the acquisition could entrench market power, with civil subpoenas issued to other entertainment companies. A combined Netflix and HBO Max entity could control roughly 30% of the U.S. subscription streaming market, a threshold that triggers heightened antitrust concern. The Writers Guild of America has called for the transaction to be blocked.
Needham analysts estimate $3 billion to $4.5 billion in cost synergies from a Paramount-WBD combination, translating to $24 billion to $36 billion in value creation, and anticipate fewer regulatory issues compared to Netflix's bid. Bank of America acknowledged the "industrial logic" of combining Paramount and WBD but cautioned that integration and restructuring could take years.
"The combination would substantially expand the intellectual property, production, and streaming assets controlled by Paramount ownership, potentially disrupting the broader media industry," analysts at Guggenheim observed.
Warner Bros. Discovery shares have surged from their 52-week low of $7.52, now trading near the 52-week high of $30 that matches Paramount's offer price. With 21 analysts covering the stock, the consensus target price stands at $28.45, below Paramount's bid but above Netflix's offer. Morgan Stanley recently raised its price target to $29 from $15 while maintaining an "Equal Weight" rating.
The outcome will reshape the competitive landscape of global media. A Paramount victory would create a combined streaming powerhouse capable of challenging Netflix and Disney, while a Netflix-WBD merger would cement the streaming giant's position as the dominant force in premium content. With shareholders holding the deciding vote and regulators scrutinizing both transactions, the fate of one of Hollywood's most storied studios remains uncertain.