Warner Bros. Discovery And Paramount Skydance: A Lower-Risk Arb Play And A Leveraged Bet

2026-03-06 06:01:44 ET

We Have A Winner

Nearly three months have passed since I covered the competing bids for Warner Bros. Discovery ( WBD ) by Netflix ( NFLX ) and Paramount Skydance ( PSKY ). Both potential buyers maintained fiscal discipline and avoided a heated bidding war. Netflix made no changes to its original bid, except to change it to an all-cash deal of $27.75 per share, a move that may have been necessitated by the drop in NFLX shares below the lower collar limit of the deal. Paramount raised their bid just $1 to $31, plus $0.25 per quarter for each quarter after Sep. 30 if the deal is not closed. Paramount also made stronger commitments to obtain equity and debt financing to close the deal and refinance outstanding WBD debt. Finally, Paramount has already paid the $2.8 billion breakup fee to Netflix and committed to a $7 billion fee payable to WBD if their deal does not close due to regulatory reasons. Unchanged from the original bid was Paramount's deal to buy the whole company, rather than spinning off the cable and broadcast assets into a new company, as would have been necessary under the Netflix deal. This reinforced the superiority of the Paramount deal, as we have seen a similar spinoff, Versant ( VSNT ), trade down since its spinoff from Comcast ( CMCSA ). WBD's board found the new offer to be superior, and Netflix walked away rather than bid higher....

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