Media

Warner Bros Discovery closes the door (again) on Paramount: 'inadequate' offer

The board reiterates that the Netflix deal remains the way forward

by Andrea Biondi

7 January 2026

3' min read

Translated by AI

Versione italiana

Key points

"Financial risk"
Capitalisation and penalties
A game that remains open
Netflix satisfaction

3' min read

Translated by AI

Versione italiana

Warner Bros Discovery reaffirms its strategic line and rejects, again, Paramount Skydance's hostile bid. The group's board of directors voted unanimously against the $108 billion proposal put forward by the competitor, deeming it "inadequate" and structurally riskier than the $83 billion deal already signed with Netflix.

The decision, communicated to shareholders in a formal letter, confirms the group's preference for the combination with the streaming giant announced last 5 December. An operation that involves Warner Bros studios and streaming activities, including Hbo Max, and that simultaneously envisages the spin-off of the cable networks in a separate company, Discovery Global.

"Financial risk"

The central issue remains the financial structure of the Paramount offer. According to Wbd's board, the rival proposal would be 'in fact' the 'largest leveraged buyout in history', based on massive leverage. The operation would entail additional debt for Warner estimated at around 54 billion dollars, with the involvement of leading credit institutions such as Bank of America, Citigroup and Apollo. A construction that, the board emphasises, would 'materially place Wbd at greater risk' and significantly increase the likelihood of the deal not closing.

Capitalisation and penalties

In a direct comparison, Netflix is described in the same letter as a financially stronger counterpart. The group led by Ted Sarandos and Greg Peters can count on a market capitalisation of around USD 400 billion, an investment grade rating (A/A3) and an estimated free cash flow generation of over USD 12 billion in 2026. In contrast, Paramount Skydance - with a market capitalisation of around 14 billion - would have to support an operation almost seven times its market value, leveraging over 50 billion of new debt.

Also weighing on the Warner Bros Discovery board's valuation are the costs of a possible exit from the Netflix deal. According to estimates provided to shareholders, Wbd would have to bear about USD 4.7 billion in penalties and financial charges: USD 2.8 billion termination fee to be paid to Netflix, USD 1.5 billion related to the non-completion of the debt swap, and about USD 350 million in higher interest charges.

On the other hand, if Paramounyt Skydance were to opt out, the board writes, 'WBD shareholders would not receive sufficient compensation. The net $1.1 billion termination penalty that PSKY would pay to WBD represents an unacceptably low amount of 1.4 per cent of the equity value of the transaction, and would not help WBD in the least to address the likely damage to our business'.

A game that remains open

Finally, the board also points to the operational restrictions in the Paramount offer in the period between signing and closing, which could limit Warner's ability to refinance debt, complete the Discovery Global spin-off, and pursue key strategic initiatives. In a nonclosing scenario, the group warns, shareholders would then be left with a company burdened with constraints and costs without adequate compensation.

However, the game remains open on the regulatory and market level. Shareholders will have until 21 January to decide whether to join the Paramount offer, while both transactions - both the one with Netflix and a possible merger with Paramount - will have to pass the scrutiny of antitrust authorities in the US and Europe.

Netflix's satisfaction

The Warner Bros. Discovery board's decision was greeted with "satisfaction" by Netflix as expressed in a statement: "The WBD Board of Directors continues to fully support and recommend the Netflix merger agreement, recognising it as the best value proposition that will deliver the most value to its shareholders, as well as consumers, creators and the entertainment industry at large," said Ted Sarandos and Greg Peters, co-CEOs of Netflix. "Netflix and Warner Bros. will combine highly complementary strengths and a shared passion for storytelling. By joining forces, we will offer audiences even more of the series and films they love, at home and in the cinema, expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry."

Andrea BiondiVicecaposervizio
Luogo: Milano
Lingue parlate: Italiano, Inglese, Francese
Argomenti: Finanza, Media, Telecomunicazioni, Economia dell'entertainment, Innovazione
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