Netflix Goes All-Cash in US$82.7-Billion Warner Bros Bid

Netflix has transitioned its US$82.7 billion acquisition bid for the studio and streaming assets of Warner Bros Discovery (WBD) to an all-cash structure. This tactical adjustment aims to eliminate equity volatility and finalize the transaction amid a competing proposal from Paramount Skydance.

The transition to a liquid compensation model serves as a defensive mechanism against market fluctuations that previously compromised the perceived value of the deal. By removing the equity component, Netflix addresses the 15% depreciation in its share price observed since the merger was announced on Dec. 5, 2025. This depreciation saw Netflix stock fall to US$88, well below the original US$97.91 floor price, which provided Paramount Skydance with leverage to argue that its competing bid was superior.

"Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty. The merger consideration is a fixed cash amount to be paid by an investment-grade company, providing [WBD] stockholders with certainty of value and liquidity immediately upon closing the merger," says Ted Sarandos, Co-CEO, Netflix.

The bidding war for WBD represents a critical juncture in the consolidation of the global media and entertainment sector. The core of the dispute involves Netflix and Paramount Skydance, both of which seek to integrate the high-value assets of WBD. These assets include its film and television studios, the HBO library, and major intellectual property franchises such as Game of Thrones, Harry Potter, and the DC Comics superheroes Batman and Superman.

On Jan. 12, 2026, Paramount Skydance Corporation filed a lawsuit in the Delaware Chancery Court to compel financial transparency regarding the US$82.7 billion merger. The litigation sought to enable shareholders to evaluate a competing US$30 per share all-cash offer that Paramount Skydance claims is financially superior. Although a Delaware judge rejected the request to expedite disclosures, the legal friction highlights the aggressive nature of the competition for WBD assets. David Ellison, Chairman and CEO, Paramount Skydance, says that the WBD board has failed in its fiduciary duty to provide essential valuation details.

"WBD has provided increasingly novel reasons for avoiding a transaction with Paramount, but what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer," Ellison says. "Along with the WBD shareholders, we have asked for the customary financial disclosure a board is supposed to provide shareholders when making an investment recommendation."

Financial Analysis and Regulatory Framework

The revised Netflix offer of US$27.75 per share in cash replaces the previous hybrid consideration of US$23.25 in cash and US$4.50 in Netflix stock. This adjustment was necessitated by the technical erosion of the value of the stock component as Netflix shares retreated from their December peaks. According to a regulatory filing released on Tuesday, the new all-cash bid has the unanimous support of the WBD board.

A primary point of technical contention between the competing bidders is the valuation of the Discovery Global spin-off. This planned entity will contain television assets including CNN, TNT Sports, and the Discovery+ streaming service. Paramount Skydance has characterized these linear assets as effectively worthless in the current media climate. However, financial advisers for WBD utilized three distinct methodologies to value Discovery Global:

• Whole-Company Valuation: A floor price of US$1.33 per share by applying a single value across the entire entity.

• Strategic Transaction Model: A ceiling price of US$6.86 per share, assuming the spin-off becomes involved in a future deal.

• Independent Analyst Median: About US$4 per share, according to some market experts.

The WBD board maintains that the Netflix agreement is superior because stockholders will retain equity in Discovery Global. When the cash consideration from Netflix is combined with the projected value of these shares, the board argues the total realized value for stockholders exceeds the US$30 per share offered by Paramount Skydance.

Comparison of Debt Structures and Credit Risk

The financial viability of the two offers presents divergent risk profiles regarding leverage and creditworthiness. Netflix has a market capitalization of about US$402 billion and maintains an investment-grade credit rating. A combined Netflix and WBD entity would carry an estimated US$85 billion in debt, resulting in a leverage ratio of under four.

In contrast, the proposal from Paramount Skydance involves US$40.4 billion in equity and US$54 billion in new debt. This structure would result in a total debt load of US$87 billion for the combined entity. Because the bonds of Paramount are rated at speculative-grade levels by S&P Global, the WBD board expressed concern that such a merger would further weaken credit ratings and increase the cost of capital. Furthermore, Netflix has agreed to allow WBD to reduce the amount of indebtedness to be borne by Discovery Global by US$260 million.

The board of directors of WBD has detailed about US$4.7 billion in additional costs associated with terminating the Netflix deal in favor of Paramount Skydance. These costs include a US$2.8 billion termination fee payable to Netflix, US$1.5 billion in lender fees, and US$350 million in financing costs. These expenses would represent a reduction of about US$1.79 per share in value for WBD shareholders.

"Netflix’s move to go all-cash on the Warner Bros. deal is a smart pivot at a time when its own falling share price had begun to weaken its hand. A cash bid strips away uncertainty and is unquestionably more appealing from Warner Bros.’ perspective, even if it does nothing to ease regulatory scrutiny," says Matt Britzman, Senior Equity Analyst, Hargreaves Lansdown, to Reuters.

Market Response and Shareholder Action

As of early trading on Tuesday, shares of Netflix were up 0.9% following the announcement. Paramount shares were down 1.9%, while WBD shares were down 0.5%. WBD will hold a special investor meeting to vote on the Netflix deal, which is expected to occur by April 2026.

"This new agreement only ramps up the pressure. The changes show that Netflix is serious about winning, and the accelerated shareholder vote means Paramount needs to act with urgency. Now, it is up to Paramount to provide a clearly superior offer if they want to get this done," says Alex Fitch, Portfolio Manager, Harris Oakmark.

Paramount Skydance, whose tender offer expires on Jan. 21, 2026, has announced its intention to nominate a slate of directors for election at the WBD 2026 Annual Meeting. These nominees would be tasked with exercising the right of WBD to engage with the offer from Paramount Skydance. Additionally, the company will propose an amendment to the bylaws of WBD to require shareholder approval for any separation of the global networks division.

"Paramount will make another appeal to shareholders. Unless Paramount raises its bid, the appeal will be window dressing," says Ross Benes, Analyst, Emarketer.  The race is expected to come to a head later this year as investors weigh the immediate liquidity of the Netflix cash offer against the long-term potential of the linear assets in the Discovery Global spin-off.