Paramount Stock Jumps Over 5% as Warner Bros. Reopens Sale Talks

Paramount shares jumped over 5% on Tuesday after Warner Bros. Discovery said it was reopening sale negotiations with CEO David Ellison. The board is giving him until Feb. 23 to deliver his “best and final” offer for the entire company.

“Throughout the entire process, our sole focus has been on maximizing value and certainty for WBD shareholders,” Warner Bros. Discovery CEO David Zaslav said in a statement. “Every step of the way, we have provided [Paramount] with clear direction on the deficiencies in their offers and opportunities to address them. We are engaging with [Paramount] now to determine whether they can deliver an actionable, binding proposal that provides superior value and certainty for WBD shareholders through their best and final offer.”

WBD’s board said it received a limited waiver from Netflix to reenage for a seven-day period, in which it will discuss the unresolved deficiencies and clarify certain terms in Paramount’s latest amended $30 per share offer. However, it continues to recommend the streamer’s $83 billion deal and is urging shareholders to vote against the Paramount offer.

Warner Bros. Discovery shares jumped 2.3% following the news, while Netflix shares slid 1.4%.

Ellison’s ninth bid includes $43.6 billion of equity commitments from the Ellison family and RedBird Capital Partners and $54 billion of debt commitments from Bank of America, Citigroup and Apollo. Oracle co-founder Larry Ellison has also made an irrevocable personal guarantee towards $43.3 billion of the equity financing, as well as any damage claims against Paramount.

Additionally, Paramount is offering a 25 cent per share “ticking fee,” which is the equivalent of approximately $650 million cash value that would be paid to shareholders for every quarter the transaction is not closed beyond Dec. 31, 2026, and agreed to cover a $2.8 billion termination fee payable to Netflix, as well as other debt financing commitments. Paramount also said it is open to discussing “contractual solutions to account for the possibility of continuing deteriorating financial performance beyond what WBD is currently projecting for its linear network business.”

Following receipt of the offer, WBD said that a senior representative for Paramount informed the company’s board that it would agree to pay $31 per share if they reopened sales talks, though Ellison emphasized that isn’t his “best and final” proposal.

Netflix retains the right to match any offer and expressed confidence that its current deal is “the only certain path to delivering value to WBD’s stockholders.”

“While we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for WBD stockholders and the broader entertainment industry caused by PSKY’s antics,” the streamer added.

In addition to reopening talks, shareholders are set to vote on the Netflix deal during a special meeting on March 20 at 8 a.m. ET. Shareholders of record as of Feb. 4 at 5 p.m. ET will be entitled to vote at the meeting.

The resumption of talks comes after tensions erupted between the two sides. In addition to his tender offer, Ellison sued Warner Bros. in January in an effort to extract more details about how the Netflix deal and Discovery Global spinoff were valued. He also launched a proxy fight in an attempt to get shareholders to oppose the Netflix deal and require a vote to complete the spinoff of Warner’s cable networks into Discovery Global, which is already on track for later this year. 

Some shareholders have also accused the Warner Bros. board of not adequately engaging with Paramount, including Ancora Holdings, which has built a $200 million stake and is threatening to launch its own proxy fight, and Pentwater Capital Management, Warner Bros.’ seventh largest shareholder. They’ve also argued that the Netflix deal, which is offering $27.75 per share plus additional “stub equity” from the Discovery Global spinoff, is inferior to Paramount’s offer and raises antitrust concerns.

In addition to Ancora and Pentwater, lawmakers on Capitol Hill and Hollywood creatives and unions have expressed similar concern about the Netflix deal’s potential impact on competition, consumer prices, jobs in Hollywood and the theatrical business. 

On Tuesday, Netflix once again defended its deal, noting that it would “deliver more choice and greater value to audiences worldwide with expanded access to exceptional films and series – both at home and in theaters.” It also said the deal “is centered on growth, opportunity, and a reinforced commitment to creating world-class films and television – not consolidation and layoffs” and would expand production capacity, increase its investment in original content and create jobs.

Additionally, Netflix expressed confidence that its deal with Warner Bros. has a “clear path to timely regulatory approval.” It has already submitted its Hart-Scott-Rodino (HSR) filings and is engaging constructively with competition authorities across the world, including the U.S. Department of Justice (DOJ), state attorneys general, the European Commission, and the U.K. Competition and Markets Authority (CMA).

At the same time, Netflix blasted Paramount, arguing it has “repeatedly mischaracterized the regulatory review process by suggesting its proposal will sail through, misleading WBD stockholders about the real risk of their regulatory challenges around the world.” For example, the company noted that it received clearance from foreign investment authorities in Germany on Jan. 27 — the same day as Paramount.

It also said that the foreign funding backing Paramount-Skydance’s bid is “already raising serious national security concerns” and that it expects the Committee on Foreign Investment in the United States (CFIUS), Team Telecom in the U.S. and European authorities to scrutinize Paramount’s backing from Middle Eastern investors.

“In reality, PSKY is far from obtaining all of the regulatory clearances required,” the company said. “Enforcers will focus on the impact of PSKY’s proposal on competition, job losses, reduced output, and downward pressure on wages for film and television workers.”

Netflix also warned that the Paramount offer would create “significant horizontal overlaps” that will concern antitrust enforcers, including combining two of the five major Hollywood studios, two major theatrical distribution channels, two of the major TV studios, two major news networks and two major sports distributors.

Additionally, the streamer argued that Ellison’s “aggressive financing package, rapid deleveraging plans, and performance track record pose tremendous risks to both the completion of their proposed deal and the industry” and that Paramount would be over-leveraged with approximately $84 billion in debt and a roughly 7 times leverage ratio.

In order to hit the midpoint of its deleveraging targets, Netflix said Paramount would need to realize roughly $16 billion of cost savings — far in excess of its previously disclosed $6 billion synergy figure — through “greater, even deeper job
cuts that would irreparably harm the entertainment industry.” It added that Paramount is undershooting its guidance for 2026 adjusted operating income by 15%, which could mean even more cost cuts.

“This extraordinary execution risk and track record of operational underperformance could impact PSKY’s ability to fund and close a transaction,” the company concluded. “A business plan that is dependent upon $16 billion in cost savings should be an unmistakable red flag for regulators, policymakers, union leaders and creatives.”

Netflix shares have fallen 12.5% in the past month, 38.6% in the past six months, 16% year to date and 26.3% in the past year.

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