Hollywood on Edge: Another Round in the Battle for Warner Bros.
Recent developments surrounding Warner Bros. Discovery have intensified as the board has reopened discussions with Paramount after receiving a temporary waiver from Netflix for limited negotiations. The board has formally rejected Paramount’s revised proposal and set a deadline of February 23 for a final offer submission. Despite this, the leadership continues to recommend that shareholders accept Netflix’s proposal, citing its predictability and higher likelihood of closing.
Paramount's Proposal
Paramount has indicated a willingness to increase its bid to approximately $31 per share, up from $30, which would value Warner Bros. Discovery at over $108 billion, including debt. This proposal encompasses Warner Bros. Discovery’s entire portfolio, including television and news segments, and includes mechanisms to enhance its financial appeal, such as a quarterly compensation for shareholders in case of delayed closing and a commitment to cover the $2.8 billion termination fee owed to Netflix. On a nominal basis, Paramount’s offer appears more attractive.
Netflix's Offer
In contrast, Netflix’s offer targets the studio operations and streaming segment at about $27.75 per share, with a total transaction value of around $82–83 billion. Although the per-share price is lower, the cash-based structure and previously agreed terms provide greater transparency and clarity, which the Warner Bros. Discovery board believes translates to a higher certainty of completion. Regulatory considerations are also crucial; a full takeover by Paramount may require a more complex antitrust review, while Netflix’s narrower focus could face less regulatory scrutiny.
Market Implications
The ongoing negotiations suggest continued uncertainty and heightened volatility in the market. Investors are currently weighing the potential for a bid that could be recognized as superior to the recommended transaction. Any improvement in terms from Paramount could bolster Warner Bros. Discovery’s share price and increase pressure on Netflix, which retains the option to match or revise its offer. This scenario sets the stage for a potential bidding war, which could enhance shareholder value but also introduce higher risks and price fluctuations.
Medium-Term Considerations
Three key factors will influence the outcome in the medium term: the final level and structure of Paramount’s offer, the board’s evaluation of its superiority compared to the existing agreement, and the regulatory authorities' stance. If Paramount fails to present a clearly more attractive and credible proposal, the market may revert to the expectation of completing the Netflix transaction. Conversely, a significantly higher and fully financed offer from Paramount could lead to a shift in the board’s recommendation and initiate further negotiations.
Conclusion
This situation exemplifies the classic tension between maximizing price and minimizing execution risk. Some investors may prioritize the higher valuation implied by Paramount’s bid, while others may favor the stability and predictability of the Netflix transaction. Until a final resolution is reached and shareholders vote on March 20, 2026, elevated volatility and strong market reactions to any new developments in the negotiations are anticipated.