Strategic Crossroads: Warner Bros. Discovery Board Rejects Paramount’s Leveraged Bid, Backs Netflix Merger

Warner Bros. Discovery (A) US9344231041

The board of Warner Bros. Discovery (A) has firmly rejected a heightened unsolicited acquisition proposal from Paramount Global, choosing instead to proceed with its existing merger agreement with Netflix. The decision, announced on January 7, 2026, centers on concerns over excessive debt and financial risk, placing the media conglomerate at the heart of a major industry takeover battle.

Although the competing bid from Paramount—supported by Skydance and a consortium involving Larry Ellison—carried a higher nominal valuation, the board deemed it inferior. The Paramount offer valued Warner Bros. Discovery at approximately $108.4 billion, or $30 per share. This surpasses the value of the Netflix agreement, which stands at roughly $82.7 billion, or $27.75 per share.

The critical distinction lies in the financing structure. The board labeled the Netflix deal a "superior proposal," primarily because the Paramount bid is structured as a Leveraged Buyout (LBO). This approach would load the combined entity with over $50 billion in new debt, resulting in a gross debt burden of about $87 billion—a level the directors consider an irresponsible financial risk to operational stability.

Switching to the Paramount deal would also trigger immediate breakup costs totaling around $4.7 billion. This includes a termination fee of $2.8 billion payable to Netflix and approximately $1.5 billion to lenders. While Larry Ellison provided a personal equity guarantee of $40.4 billion, the board remains unconvinced that this mitigates the dangers posed by the remaining substantial debt load.

Dispute Over Linear TV Valuation and Operational Shifts

A key area of contention is the valuation of the planned spin-off of the linear TV business, "Discovery Global," which includes networks like CNN and TNT. The Paramount proposal values this asset at just $1 per share, whereas the structure of the Netflix transaction implies a valuation of $4 per share.

The board's skepticism appears bolstered by recent market trends. In early January 2026, the initial public offering of Versant Media—a cable spin-off from Comcast—saw its share price decline by 20% within just two days of its debut.

Amid the takeover contest, Warner Bros. Discovery continues its operational restructuring. On January 6, 2026, the company appointed Erik Ellner as the new head of Business Affairs for the Warner Bros. Motion Picture Group. Strategic distribution changes are also on the horizon following a successful merger: reports indicate Netflix plans to shorten the exclusive theatrical window for Warner Bros. films to a mere 17 days, a policy that would apply even to major franchises such as "Harry Potter" and the DC Universe.

Deadline Looming and Shareholder Guidance

Paramount's tender offer is set to expire on January 21, 2026. The Warner Bros. Discovery board has formally recommended that shareholders take no action regarding the Paramount proposal and instead support the Netflix merger. Directors argue the Netflix path offers greater certainty of closing within 12 to 18 months, while the Paramount alternative carries significant regulatory and financial hurdles.