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Paramount Set for Warner Bros Takeover After Netflix Drops Bid

By Mariana Allende | Journalist & Industry Analyst - Fri, 02/27/2026 - 14:42

Warner Bros. Discovery is set to merge with Paramount Skydance in a US$108.4 billion deal after Netflix declined to match a superior US$31-per-share offer. This horizontal integration consolidation affects the global media, streaming, and telecommunications industries, uniting major assets like HBO Max, Paramount+, CNN, and CBS. The transaction faces rigorous antitrust scrutiny from U.S. and international regulators due to its impact on market competition and an estimated combined debt load of US$87 billion.

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Warner Bros. Discovery (WBD) is set to merge with Paramount Skydance in a US$108.4 billion (MX$1.86 trillion) transaction, ending a protracted takeover battle after Netflix declined to increase its competing offer. The agreement represents a decisive shift in WBD’s strategic direction, replacing a prior definitive deal with Netflix in favor of a higher all-cash proposal.

Netflix confirmed it would not revise its bid. “We have always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the transaction is no longer financially attractive,” the company said in a statement.

WBD CEO David Zaslav said the board intends to proceed with the Paramount agreement, describing it as a transaction that will deliver “tremendous value” to shareholders and create a stronger global content platform.

Superior Offer Reshapes the Deal Landscape

Paramount Skydance’s revised proposal values WBD at US$31 per share, significantly above Netflix’s US$27.75 per share, bringing the total equity value to US$108.4 billion versus the US$82.7 billion previously agreed with Netflix.

The original Netflix agreement, signed Dec. 5, 2025, included a mixed structure of US$23.25 in cash and US$4.50 in Netflix stock per share. After Netflix shares declined roughly 15%, the offer was amended in January 2026 to an all-cash structure to reduce volatility risk. Paramount Skydance continued increasing its valuation, ultimately surpassing the Netflix bid by a wide margin.

Paramount has agreed to fund the US$2.8 billion breakup fee WBD owes Netflix. It also raised its reverse termination fee to US$7 billion, strengthening deal certainty in the event regulators block the transaction. A quarterly “ticking fee” of US$0.25 per share will accrue starting in 2027 if closing extends beyond 2026, adding roughly US$650 million in additional compensation.

Strategic Contrast: Spin-Off vs. Full Integration

The competing bids reflect fundamentally different strategic visions. Under Netflix’s plan, WBD would have separated its legacy linear television assets — including CNN, TNT Sports and Discovery+ — into a standalone entity called Discovery Global, effectively splitting streaming and traditional broadcast operations.

Paramount Skydance instead proposes acquiring the entire corporation, preserving integration across studios, broadcast networks, streaming platforms and cable assets. This approach resonated with institutional shareholders concerned about the long-term viability of a linear-only spin-off in a structurally declining segment.

Activist investors, including Ancora Holdings and Pentwater Capital Management, pressured WBD’s board to reconsider Paramount’s offer, arguing it provided superior long-term value and strategic coherence.

Financing and Leverage Profile

The transaction is backed by US$45.7 billion in equity from the Ellison Trust, led by Oracle co-founder Larry Ellison. Additional financial support has been pledged to meet solvency requirements and ensure transaction stability.

Debt financing totals US$57.5 billion, arranged by Bank of America, Citi and Apollo. The combined company is expected to carry approximately US$87 billion in total debt.

This leverage level introduces credit risk considerations. Netflix, with a market capitalization near US$402 billion, maintains investment-grade ratings. Paramount’s debt, by contrast, is currently rated below investment grade by S&P Global, raising concerns about refinancing costs and capital flexibility for the merged entity.

Regulatory Headwinds Intensify

The merger would combine two major Hollywood studios and consolidate streaming platforms HBO Max and Paramount+, while uniting CNN and CBS under one corporate structure. As a horizontal merger between direct competitors, the deal is expected to face heightened antitrust scrutiny.

California Attorney General Rob Bonta confirmed that the state has an open investigation and intends to conduct a rigorous review. Federal regulators, European authorities and US lawmakers — including Senators Elizabeth Warren, Bernie Sanders and Richard Blumenthal — have also signaled potential concerns.

Unlike the Netflix transaction, which raised vertical integration questions, the Paramount merger presents traditional horizontal concentration issues in film production, television distribution and streaming.

To mitigate regulatory risk, Paramount appointed Rene Augustine as Senior Vice President of Global Public Policy, reinforcing its government engagement strategy.

Market Reaction and Timeline

Netflix shares rose more than 10% following its decision not to match the bid, as investors welcomed capital discipline and reduced leverage exposure.

WBD’s board must formally terminate the Netflix agreement and adopt the Paramount merger contract. A shareholder vote is expected, though the timeline may shift from the initially targeted April 2026 closing date depending on regulatory review length.

Transaction Overview