Shares in Warner Bros Discovery (WBD) have edged lower in the days leading up to a crucial takeover deadline, as the market assesses the viability of two competing bids from streaming giants Netflix and a consortium led by Paramount Skydance.
The Battle for Warner Bros Discovery
On Monday 30 December, WBD stock slipped 0.04 per cent to $28.79 (£21.30), trading roughly four per cent below an all-cash offer of $30 per share from Paramount Skydance. This price gap underscores the significant risks surrounding the potential deal, which include financing hurdles, intense regulatory scrutiny, and the need for shareholder approval.
Investors have been treating WBD as a classic deal-arbitrage play, attempting to price in both the likelihood and the timing of a final resolution before the 21 January offer deadline. The Paramount Skydance bid has been bolstered by a personal $40.4bn guarantee from Oracle co-founder Larry Ellison and an increased reverse termination fee of $5.8bn, measures designed to convince wary shareholders of the offer's solidity.
Netflix vs. Paramount: Two Strategic Paths
However, the WBD board has publicly expressed a preference for the offer from Netflix. Their proposal, according to WBD, consists of $23.25 in cash and approximately $4.50 in Netflix stock for each Warner share, valuing the company at $27.75 per share. Warner Bros Discovery has stated that this combination appears to deliver "superior, more certain value" to its shareholders.
The Netflix route is complex. To finance its move, Netflix has refinanced part of a substantial $59bn bridge loan, securing a $5bn revolving credit facility and up to $20bn in delayed draw term loans, with around $34bn still needing to be syndicated to other lenders. In contrast, the Paramount Skydance bid requires no stock issuance, offering a simpler, all-cash proposition.
High Stakes and High Hurdles
Beyond financing, any successful deal will face intense antitrust review on both sides of the Atlantic. Regulators are on high alert for consolidations in streaming, distribution, and advertising, concerned about the impact on consumer choice and pricing. Warner Bros Discovery's vast portfolio, which includes legendary film studios, HBO, CNN, and the Discovery channel suite, makes it a particularly significant target for scrutiny.
The rewards for the victor are immense. For Netflix, acquiring WBD would bring globally adored franchises like Harry Potter directly into its content library, a major boost for its 428 million subscribers. For Paramount, the deal would deliver unprecedented scale across streaming and theatrical distribution.
Yet, both suitors must navigate the treacherous waters of post-merger integration. Warner's own history serves as a cautionary tale, with past mergers such as AOL-Time Warner and AT&T-Time Warner highlighting the dangers of culture clashes, overleveraged balance sheets, and slow returns on promised synergies. WBD itself still carries over $40bn in debt, a factor shaping all takeover discussions.
Market sentiment remains cautious. In holiday-thinned trading on Monday, US stocks closed lower, with Netflix down 0.33 per cent and Paramount Skydance slipping 0.66 per cent. Analysts note that thin volumes can exaggerate price swings in stocks linked to deal activity.
Seth Shafer, principal analyst at S&P Global, commented, "I doubt many Warner Bros shareholders that are on the fence or planning to vote no were holding out." All eyes will now turn to Netflix's fourth-quarter results on 20 January, which may provide fresh insight into the company's content strategy and financial capacity should its bid succeed.
