TLDR
- Warner Bros. Discovery (WBD) board is evaluating whether to restart negotiations with Paramount Skydance following an improved $78 billion proposal announced February 10.
- Paramount’s enhanced offer includes a $650 million quarterly ticking fee, coverage of WBD’s $2.8 billion Netflix breakup fee, and up to $1.5 billion for debt refinancing.
- The existing $82.7 billion Netflix agreement faces opposition from Trump administration antitrust regulators examining streaming market concentration issues.
- If WBD reopens discussions with Paramount, Netflix will receive an opportunity to match any higher bid under the existing sale agreement terms.
- Investment firm Ancora Holdings built a $200 million position in WBD to oppose the Netflix transaction, though shareholder support for Paramount remains limited.
Warner Bros. Discovery faces a crucial crossroads as two rival companies compete for control. The board is evaluating whether to abandon its Netflix agreement in favor of Paramount Skydance’s improved terms.
Warner Bros. Discovery, Inc., WBD
Paramount restructured its $78 billion all-cash proposal earlier this month. The company added financial incentives designed to accelerate deal closure and reduce WBD’s risk.
The revised terms include a $650 million quarterly payment if the transaction extends beyond December 31. This ticking fee demonstrates Paramount’s urgency to complete the acquisition quickly.
Paramount also agreed to reimburse WBD’s $2.8 billion breakup fee owed to Netflix. The company committed an additional $1.5 billion to assist with debt refinancing requirements.
These financial commitments signal Paramount’s confidence in navigating the regulatory approval process. The company believes it can close faster than Netflix.
Regulatory Pressure Mounts on Netflix Transaction
Netflix and WBD finalized an $82.7 billion sale agreement in December. Federal regulators are now questioning whether the combination creates excessive market power.
Trump administration officials are scrutinizing Netflix’s streaming market position. A source familiar with regulatory discussions indicated the Netflix deal faces strong resistance from executive branch officials.
Antitrust reviewers are examining whether merging Netflix with HBO Max concentrates too much control. The combined entity would unite the largest and third-largest streaming platforms.
DOJ antitrust division chief Gail Slater resigned recently under White House pressure. Her exit complicates the timeline, potentially extending the review beyond six months.
If regulators reject the transaction and Netflix challenges the decision in court, resolution could take over a year. This extended uncertainty makes the Paramount offer more attractive.
WBD Weighs Strategic Options
WBD must formally notify Netflix before entertaining Paramount’s revised proposal. Netflix would then have the right to submit a matching or superior bid.
CEO David Zaslav reportedly wants Paramount to increase its $30 per share offer. Insiders suggest he’s seeking a total valuation exceeding $85 billion.
Netflix’s current $27.75 per share proposal depends on divesting WBD’s cable assets. Market conditions make those assets difficult to value accurately.
Both companies expressed willingness to increase their bids. However, Netflix’s stock declined during negotiations, potentially constraining its financial flexibility.
WBD plans to reveal its Q4 2025 earnings date following the Presidents’ Day holiday. The company will also announce when shareholders will vote on the Netflix transaction.
Investor Activism and Market Response
Ancora Holdings purchased a $200 million stake specifically to oppose the Netflix deal. The firm plans to wage a public campaign against the transaction.
Despite Ancora’s efforts, just 42.3 million shares have been tendered in support of Paramount. This represents under 2% of total outstanding shares.
Paramount sued WBD alleging the company improperly favors Netflix. The lawsuit claims CEO Zaslav’s personal relationship with Netflix co-CEO Ted Sarandos biases the decision-making process.
Sources close to Paramount indicated no communication from WBD occurred through Sunday evening. Some analysts believe WBD is strategically leaking information to shield against potential litigation.
Wall Street analysts maintain a cautious stance on Paramount Skydance. The stock holds a Moderate Sell rating on TipRanks with zero Buy recommendations, one Hold, and three Sells.
Analysts project an average price target of $12.33 for PSKY shares. This target implies 19.5% potential appreciation from current trading levels.
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