Warner Bros. Discovery confirms new tender offer from Paramount Skydance but maintains support for Netflix merger

Warner Bros. Discovery, Inc. (NASDAQ: WBD) confirmed late Friday that it has received an amended unsolicited tender offer from Paramount Skydance Corporation (NASDAQ: PSKY) to acquire all outstanding shares of Warner Bros. Discovery. The offer comes just days after the company’s board unanimously rejected Paramount Skydance’s initial proposal and reaffirmed its commitment to a merger with Netflix, Inc. (NASDAQ: NFLX).

The amended offer will undergo a fresh review by Warner Bros. Discovery’s board in consultation with financial and legal advisors. However, the company has not revised its existing recommendation in support of the Netflix transaction and is cautioning shareholders against taking any action regarding the new Paramount Skydance offer until the review is complete.

Why is Warner Bros. Discovery still siding with Netflix despite a revised Paramount Skydance bid?

At the center of the conflict is Warner Bros. Discovery’s December 4 merger agreement with Netflix, which includes a compelling cash-and-stock structure alongside the spinoff of Discovery Global. The transaction was deemed superior by the board, offering $23.25 per share in cash, $4.50 per share in Netflix equity, and an added layer of upside tied to the standalone valuation of Discovery Global.

Paramount Skydance’s December 8 offer failed to meet the board’s bar for a “Superior Proposal,” a position reiterated in detail by the board on December 17. Key to their concerns was the lack of a binding equity commitment from the Ellison family, the core backers of the Paramount Skydance bid. Instead of an unconditional backstop, the proposal relied on a revocable trust with no disclosed assets or liabilities, which the board viewed as inadequate for a $108.4 billion enterprise-level transaction.

The revised offer now under review has yet to resolve those core concerns. According to the December 22 filing, the board has retained Allen & Company, J.P. Morgan, and Evercore as financial advisors, with legal counsel from Wachtell Lipton, Rosen & Katz and Debevoise & Plimpton LLP.

How does financing structure expose PSKY’s bid to higher execution risk compared to Netflix?

While Netflix is offering a cash-and-equity deal backed by its $400 billion market cap and investment-grade balance sheet, the Paramount Skydance proposal relies heavily on debt financing and contingent equity. If the PSKY deal were to proceed, Warner Bros. Discovery would be absorbed into an entity with a projected 6.8x gross leverage ratio based on 2026 EBITDA and limited current free cash flow generation. The board flagged this capital structure as particularly fragile amid a volatile media environment.

Moreover, PSKY has not agreed to reimburse Warner Bros. Discovery for the $2.8 billion termination fee owed to Netflix if the current merger agreement is scrapped. Additional complications include $1.5 billion in lost financing terms tied to a planned debt exchange, meaning that WBD shareholders could face roughly $4.3 billion in unrecoverable costs if the PSKY bid were accepted but failed to close.

The revised tender offer also remains non-binding. Paramount Skydance retains the right to alter its offer price and terms at any point prior to closing, which the board characterized as “illusory” and unacceptably uncertain in its previous response.

What role does regulatory scrutiny play in both bids—and is it a tie?

From a regulatory standpoint, Warner Bros. Discovery has concluded that there is no material difference in the approval risk between the Netflix and Paramount Skydance transactions. Both would require substantial scrutiny across U.S. and international jurisdictions. However, Netflix has agreed to a $5.8 billion regulatory break fee—significantly higher than the $5 billion offered by PSKY—suggesting a higher level of commitment from Netflix to navigate potential antitrust or competition hurdles.

The board’s review emphasized that Netflix’s financial stability and enforceability of its commitments make the transaction a more reliable option for shareholders compared to PSKY’s conditional and amendable offer structure.

Has Paramount Skydance addressed WBD’s concerns around operational synergies or integration risks?

Another sticking point is PSKY’s assertion that it can achieve $9 billion in operational synergies by combining Paramount, Skydance, and Warner Bros. Discovery. The board cast doubt on these projections, calling them “ambitious” and warning that the consolidation could ultimately weaken the broader Hollywood ecosystem rather than strengthen it.

Operational complexity aside, the board argued that PSKY’s offer still lacked credibility in addressing previous concerns—six proposals in total have been received and reviewed, with none deemed superior.

How are institutional investors likely to react—and what’s next in the deal timeline?

Institutional sentiment may remain cautious until the board completes its current review. The unchanged recommendation in favor of the Netflix merger, combined with skepticism over PSKY’s financing credibility, may deter major shareholders from acting on the amended offer prematurely.

However, Paramount Skydance’s persistence signals that deal momentum is far from over. A hostile takeover scenario could emerge if PSKY escalates its tender campaign, especially if retail shareholders or activist investors sense an opportunity to extract more value than the Netflix agreement implies.

Yet, Warner Bros. Discovery’s board appears intent on defending the Netflix merger as the best path to shareholder value realization, citing enforceable terms, strategic upside from the Discovery Global separation, and a more resilient capital structure.

The board’s formal recommendation regarding the amended tender offer will be issued once their evaluation concludes. Until then, the company has explicitly advised shareholders not to tender their shares or take any action in response to the PSKY proposal.

What this means for Warner Bros. Discovery, Netflix, and Paramount Skydance going forward

• Warner Bros. Discovery confirmed receipt of a revised tender offer from Paramount Skydance but has not changed its recommendation to pursue a merger with Netflix.
• The amended offer has yet to address key concerns around the lack of an Ellison family equity backstop and remains non-binding.
• PSKY’s financing structure poses significant execution and leverage risks compared to Netflix’s cash-backed, investment-grade proposal.
• The revised tender does not offer reimbursement for a $2.8 billion Netflix breakup fee or $1.5 billion in lost debt exchange value, adding downside risk for WBD shareholders.
• Regulatory approval risks are considered similar for both proposals, with Netflix’s higher break fee indicating greater commitment to closing.
• Paramount Skydance’s $9 billion synergy projections are viewed as operationally aggressive and potentially disruptive to the entertainment ecosystem.
• WBD’s board maintains that the Netflix deal provides a more certain path to value, citing enforceability, capital strength, and deal structure.
• A hostile takeover scenario cannot be ruled out if PSKY pushes further, but institutional alignment appears to remain with the board’s Netflix preference.