The fight for Warner Bros. Discovery (WBD) goes well beyond a standard media merger. It represents a turning point in Hollywood’s consolidation, centered on the future of one of the nation’s oldest and most influential entertainment companies. At stake is whether WBD is absorbed by a traditional studio operating within the same legacy framework or folded into a newer media giant with little history managing Hollywood’s long-standing business model. WBD’s leadership repeatedly turning away Paramount Skydance’s takeover bids while remaining committed to its agreement with Netflix becomes far more understandable once the financial implications and strategic trade-offs are weighed.
Paramount’s Deal Looks Big on Paper but Risky in Practice
Paramount’s financed all-cash bid values WBD at roughly $30 per share, with an equity value of $77.9 billion and an enterprise value of $108.4 billion, making it appear higher than Netflix’s offer of $27.75 per share, which carries an equity value of $72 billion and an enterprise value of $82.7 billion.
Paramount maintains that its offer is more straightforward and superior, but WBD’s board and management have a very different take. They see Paramount’s proposal as heavily dependent on debt—much of it financed through new borrowings that could leave the combined company overleveraged and vulnerable if capital markets tighten or revenues slip. Paramount has tried to strengthen its bid by having Oracle co-founder Larry Ellison—whose son, David Ellison, acquired Paramount last year through Skydance—guarantee a portion of the financing, but WBD remains skeptical and is calling the offer a leveraged buyout.
This isn’t just accounting hair-splitting. A deal financed largely with debt raises serious concerns about the company’s ability to invest in content and operations during the lengthy regulatory review any merger of this scale would face.
WBD has emphasized that Netflix’s financing is more secure, while Paramount’s offer, which the board says is the “largest [leveraged buyout] in history,” would saddle the combined company with excessive debt and could “hamper WBD’s ability to perform.” WBD has been steadily reducing its own debt, which largely stemmed from the 2022 WarnerMedia-Discovery merger, lowering it from over $50 billion to nearly $33 billion as of September 2025. Paramount’s roughly $108.4 billion bid would add about $54 billion in new debt, bringing total post-acquisition debt to approximately $87 billion—well above WBD’s debt level at its formation. Moreover, Paramount’s debt package is designed so that the company itself, rather than its lenders, would bear the risk if interest rates on the long-term financing rise during the potentially drawn-out takeover process.
“The extraordinary amount of debt financing, as well as other terms of the [Paramount] offer, heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” a recent WBD letter to shareholders stated. “[Paramount] is a company with a $14 billion market capitalization attempting an acquisition requiring $94.65 billion of debt and equity financing, nearly seven times its total market capitalization. To effect the transaction, it intends to incur an extraordinary amount of incremental debt – more than $50 billion – through arrangements with multiple financing partners.”
Netflix Offers Less Headline Value but More Certainty
WBD’s board has repeatedly said its agreement with Netflix delivers greater value to shareholders and carries far less execution risk. Netflix’s offer uses a mix of cash and stock backed by its “investment grade balance sheet” and strong credit rating. The board also highlights that Netflix has a substantially higher market capitalization compared with Paramount, which it views as a much smaller player attempting to acquire a significantly larger company. Conversely, Netflix’s acquisition is far more proportionate. This combination of factors—the structure of Netflix’s offer and its market capitalization—gives WBD greater confidence that the merger will actually close without putting the company into a debt hole.
A WBD letter to shareholders stated, “Netflix is a company with a market capitalization of approximately $400 billion, an investment grade balance sheet, an A/A3 credit rating and estimated free cash flow of more than $12 billion for 2026. The merger agreement with Netflix also provides WBD with more flexibility to operate in a normal course until closing. Given these factors, the Board determined that the Netflix merger remains superior to [Paramount]’s amended offer.”
It also helps that the Netflix deal is already a binding merger agreement, whereas Paramount’s offer is a hostile tender that could be amended or fall apart if financing conditions change, resulting in significant costs.
For shareholders, that certainty to close often outweighs a slightly higher cash figure, especially if hidden costs or obligations, like termination fees or forced refinancing, could erode the apparent premium of a competing bid.
The Structure of the Netflix Deal Better Reflects WBD’s Assets
Paramount’s bid tries to buy the whole company. Netflix, by contrast, is focused on acquiring WBD’s studio and streaming assets, including the Warner Bros. studio and HBO Max, while allowing the company’s cable networks, like CNN and Discovery’s channels, to be spun off separately.
That matters because WBD’s board sees value in its cable channels independent of the core studio business. Paramount argues that, after accounting for debt and other expected costs, WBD’s cable TV networks contribute no incremental equity value, effectively valuing them at $0.00 per share in its recent letter. That assessment is based on the debt tied to those assets and the stock performance of Versant, a recently spun-off cable company from Comcast that Paramount cites as an indicator of potentially weak results for WBD’s cable networks. Paramount’s approach highlights a fundamental disagreement over the true worth of WBD’s own cable channels. WBD insists that its cable assets offer “greater scale and profits, with a geographically diversified footprint and strong international presence” compared to Versant.
In contrast, under Netflix’s acquisition, WBD can proceed with its planned 2026 split into two publicly traded entities, separating the studio and streaming business from the cable assets. This structure helps WBD address declining linear TV revenue, manage its debt, and focus more clearly on growth and investment opportunities, with the majority of the company’s current debt allocated to the TV entity. By shifting that heavy debt from the studio and streaming operations—the part Netflix and WBD are primarily focused on—the deal strengthens the core business while preserving the value of the cable channels, allowing those assets to stand on their own rather than being sold at a discount.
On the surface, Paramount’s offer appears generous to shareholders, but the underlying terms rely on heavy debt, uncertain financing commitments, and carry significant execution risks. Netflix’s acquisition may be lower in headline value, but it comes with stronger financial backing and a smaller risk of falling through. WBD’s board is taking a careful, strategic approach rather than simply pursuing a headline price, arguing that this approach better serves shareholders and the company over the long term. Ultimately, however, shareholders will decide whether Paramount succeeds, with the hostile takeover currently allowing shares to be tendered through January 21, 2026.
Featured image: Ethan Swope/Bloomberg via Getty Images
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