WBD's $108 Billion Takeover Duel: A Tactical Play on the Likely Winner

The takeover duel for Warner Bros. Discovery is now a two-horse race, with a hostile $108.4 billion, all-cash bid directly challenging Netflix's earlier deal. Paramount Skydance announced on Monday it would pay $30 per share, valuing the entire company at $108.4 billion. This is a stark increase from Netflix's offer, which was for $27.75 per share in cash and stock, with a total enterprise value of $82.7 billion. The immediate catalyst is clear: Paramount is attempting a leveraged buyout to outbid Netflix and secure the studio's assets.

The core conflict lies in the structure and risk profile of each deal. Netflix's agreement is a partial acquisition, focused on the streaming and studio production divisions. It explicitly leaves WBD's TV networks, including CNN and TNT Sports, to be spun off into a separate company called Discovery Global. WBD shareholders will receive shares in this new entity, which the market will value independently. In contrast, Paramount's offer is for all of Warner Bros.' assets, making it a more comprehensive but also more complex and costly transaction.

Warner Bros. Discovery's board has already taken sides. It unanimously rejected Paramount's offer, calling it inferior and a risky leveraged buyout. The board reiterated its recommendation to shareholders to stick with the Netflix deal, citing the extraordinary amount of debt financing required for Paramount's bid as a key sticking point. This board stance creates a clear tactical setup: the market must now weigh the higher per-share price of the hostile bidder against the lower but more certain value and less risky structure of the Netflix deal.

The Mechanics: Why the Netflix Deal Wins on Risk/Reward

The structural and financial advantages of the Netflix deal are clear, making it the superior choice on risk/reward. Paramount's offer is a leveraged buyout in all but name, while Netflix's is a partial acquisition designed to minimize friction.

The key structural advantage is Netflix's deal structure. It is a partial acquisition of streaming and studio assets, explicitly leaving WBD's TV networks-CNN and TNT Sports-to be spun off into a separate company, Discovery Global. This separation is critical. It reduces the regulatory scrutiny that a full takeover would face, as the deal does not combine two major broadcast networks. The market will value Discovery Global independently, which introduces some uncertainty but avoids the complex antitrust hurdles of a full merger. Paramount's offer, by contrast, would acquire all assets, including the networks, making it a far more complicated and potentially blocked transaction.

The critical financial risk lies entirely with Paramount's financing. The deal is effectively a leveraged buyout, requiring over $87 billion in pro forma gross debt. This massive leverage, estimated at 7x, raises serious closure risks. Warner Bros. Discovery's board has cited this financing as a key uncertainty, noting the need for $40.4 billion in equity guarantees and over $50 billion in borrowing. The board's letter states that Paramount's offer carries an extraordinary amount of debt financing that create risks to close. For context, Paramount's market value is about $14 billion, meaning the acquisition would require financing nearly seven times its own size. This creates a high-stakes dependency on flawless execution of complex debt arrangements, a vulnerability the board sees as unacceptable.

In practice, this sets up a clear tactical play. The Netflix deal offers a higher total per-share value-estimated at $28 to $33-alongside a more certain path to closure. Paramount's $30 offer is a higher headline price, but it comes with a far greater risk of falling apart. The board's unanimous rejection underscores that the market should not be swayed by a higher number alone; it must weigh that number against the substantial financial and execution risks Paramount's deal entails. For now, the Netflix path, with its partial structure and lower regulatory and financing friction, represents the safer, more logical bet.

The Trading Opportunity: Price Action and Near-Term Catalysts

The setup is now a classic battle of wills, with the stock price reflecting the uncertainty. Warner Bros. Discovery trades near $28.40, a level that sits squarely between the two offers. It is above Netflix's $27.75 per-share bid but below Paramount's $30 hostile offer. This positioning is the market's immediate verdict: it values the deal as more likely to close than not, but it is pricing in the substantial risk that Paramount's aggressive tactics could force a change.

Paramount is moving quickly to bypass the board and go directly to shareholders. The company has announced it will nominate directors for election at the WBD 2026 annual meeting and has filed a lawsuit to seek disclosure of information from WBD. These are aggressive steps to force a vote and pressure the board. The "advance notice" window for the annual meeting opens in three weeks, putting a near-term deadline on this proxy fight. The market will watch for any sign of a special meeting being called, which could accelerate the timeline.

The primary near-term catalyst is the shareholder vote timeline. For the Netflix deal to proceed, the spin-off of Discovery Global into a new company must be completed first. The revised plan now expects this separation to be finalized in Q3 2026. This creates a clear, visible milestone. The vote on the Netflix transaction itself is likely to happen after this spin-off is complete, providing a concrete date for the market to price in the deal's closure.

For a tactical play, the risk/reward hinges on this sequence. The stock's current price of ~$28.40 offers a modest spread above the Netflix offer, implying some probability of a Paramount win. However, the structural and financing risks of the hostile bid remain high. The most likely path is a shareholder vote that ultimately approves the Netflix deal, with the stock trading toward its implied value of $28 to $33. Any significant move toward $30 would signal growing Paramount momentum, but the path to that price is fraught with execution risk. The setup favors patience, watching the proxy fight and the Q3 2026 spin-off timeline for the next major catalyst.

Catalysts and Risks: What to Watch for the Thesis

The investment thesis hinges on a clear sequence of events. The market is pricing in a stalemate, but specific catalysts will confirm or break the setup. Here's the watchlist.

First, monitor Paramount's aggressive moves to pressure the board. The company has intends to nominate directors for election at the WBD 2026 Annual Meeting and has filed a lawsuit to seek disclosure of information from WBD. The outcome of this proxy fight and the shareholder lawsuit will be the first real test of Paramount's resolve. A successful nomination could force a special meeting, accelerating the vote timeline and potentially shifting the board's stance. Watch for any legal rulings or board responses in the coming weeks.

Second, regulatory developments remain a wildcard for the Netflix deal. The transaction already faces an uncertain antitrust review process, with a combined Netflix-WBD controlling roughly a third of US streaming. President Trump has flagged potential antitrust questions, adding fuel to a drawn-out Justice Department review. Any significant regulatory pushback here would directly threaten the Netflix path, creating a vacuum that could favor Paramount if its financing holds.

The paramount risk, however, is that Paramount's own financing falls through. The board has reiterated concerns about the more than $50 billion of borrowing required and the extraordinary amount of debt financing that creates risks to close. If financing details unravel or equity guarantees falter, the hostile bid collapses. In that scenario, Netflix becomes the sole bidder, and WBD's price would likely be capped near the original $27.75 per share offer. This is the key downside case that would break the current price action.

The bottom line is that the stock's current level reflects a balance between these forces. A move toward $30 signals Paramount gaining ground, but the path is fraught with execution risk. The safer bet remains the Netflix deal, with its clearer structure and lower financing friction. Watch the proxy fight and regulatory review for the next major catalyst, but always keep an eye on the debt ceiling for Paramount's offer.