Netflix Switches to All-Cash Deal for Warner Bros. to Outflank Paramount Bid

In a decisive move to blunt Paramount’s competing takeover attempt, Netflix has restructured its proposed acquisition of Warner Bros. Discovery’s studio and streaming assets into an all-cash deal, without increasing the overall valuation of $82.7 billion.

According to a regulatory filing released Tuesday, the Warner Bros. Discovery board unanimously approved the revised offer, which values the company at $27.75 per share. The move replaces Netflix’s earlier cash-and-stock proposal and significantly raises the stakes in one of Hollywood’s most closely watched bidding wars.

Warner Bros. Discovery has emerged as a prized target for both Netflix and Paramount Skydance due to its marquee film and television studios, expansive content library, and globally recognised franchises including Game of Thrones, Harry Potter, and DC Comics icons such as Batman and Superman.

Paramount, led by David Ellison, had intensified its efforts in recent weeks by sweetening terms and mounting a public campaign aimed at convincing shareholders that its bid was superior. Warner Bros. ultimately rejected that proposal. Paramount declined to comment on Netflix’s revised offer on Tuesday.

To secure shareholder approval, Warner Bros. Discovery will now hold a special investor meeting to vote on the Netflix deal. Netflix said the meeting is expected to take place by April.

“Our revised all-cash agreement will enable an expedited timeline to a stockholder vote and provide greater financial certainty,” Netflix co-CEO Ted Sarandos said in a statement.

Markets reacted cautiously to the news. Netflix shares rose 0.9% ahead of its quarterly earnings announcement, while Warner Bros. Discovery stock slipped 0.5% in early trading. Paramount shares fell 1.9%.

Despite the board’s endorsement, some investors believe the contest is far from settled. Alex Fitch, portfolio manager at Harris Oakmark — Warner Bros. Discovery’s fifth-largest shareholder with roughly 96 million shares — said the revised deal intensifies pressure on Paramount.

“This new agreement only ramps up the pressure,” Fitch said. “Netflix is clearly signalling how serious it is. Paramount now has very little time to respond, and if it wants to win, it must come back with an offer that is unambiguously better.”

Revised Deal Replaces Cash-and-Stock Offer

Netflix’s strategic shift follows a sharp decline in its own share price. Since announcing the original merger framework on December 5, Netflix stock has fallen roughly 15%, closing at $88 on Friday — well below the $97.91 floor price embedded in the original deal.

Paramount cited that drop as evidence that its proposal offered greater certainty. In response, Netflix replaced its earlier package of $23.25 in cash and $4.50 in Netflix stock with a fully cash-based consideration of $27.75 per share.

“The merger consideration is now a fixed cash amount paid by an investment-grade company, providing Warner Bros. stockholders with certainty of value and immediate liquidity,” the company said in its filing.

Warner Bros. Discovery also disclosed fresh valuation details for its proposed cable and television spin-off, Discovery Global, which would house assets such as CNN, TNT Sports, and Discovery+.

The board argued that when combined with continued ownership in Discovery Global, the Netflix deal delivers greater long-term value than Paramount Skydance’s $30-per-share all-cash offer.

Financial advisers used three valuation methodologies to assess Discovery Global, producing a range from a low of $1.33 per share to a high of $6.86 per share in the event of a future transaction.

Paramount has dismissed the valuation, arguing that the cable spin-off is effectively worthless and should not factor into shareholder decision-making.

Paramount Tender Offer Nears Deadline

As investors weigh the competing bids, Paramount filed a lawsuit on January 12 seeking to accelerate disclosure of Warner Bros. Discovery’s financial details. A Delaware judge rejected the request, ruling that Paramount failed to demonstrate irreparable harm.

Paramount Skydance’s tender offer is set to expire on January 21. The company did not immediately respond to a request for comment.

“Paramount will appeal to shareholders again, but without a higher price, the messaging will amount to window dressing,” said Emarketer analyst Ross Benes.

A shareholder vote later this year is expected to bring the standoff to a climax, particularly as investors reassess the long-term value of cable television assets.

Warner Bros. reiterated its rationale for rejecting Paramount’s proposal, stating that the $30-per-share offer failed to adequately compensate shareholders after accounting for execution risks, costs, and regulatory uncertainty.

“Netflix’s all-cash pivot is a smart move at a time when its falling share price had begun to weaken its negotiating position,” said Matt Britzman, senior equities analyst at Hargreaves Lansdown. “Cash removes uncertainty and is clearly more attractive to Warner Bros., even if regulatory scrutiny remains intense.”

A Netflix merger would leave the combined entity with approximately $85 billion in debt, compared with about $87 billion under a Paramount-led deal. However, Netflix’s $402 billion market capitalisation far exceeds Paramount’s $12.6 billion, giving it a stronger balance sheet.

The Netflix combination would also result in a lower leverage ratio — under four — compared with roughly seven under a Paramount transaction.

Netflix further agreed to allow Warner Bros. Discovery to reduce Discovery Global’s debt by $260 million, according to the filing.

Warner Bros. noted that Netflix holds an investment-grade credit rating, while Paramount’s bonds are rated junk by S&P and could face additional pressure.

Even if shareholders approve the deal, regulatory approval may prove challenging. Lawmakers across the political spectrum have warned that increased media consolidation could lead to higher consumer costs and reduced choice.

Paramount’s backers, the Ellison family, have argued that their bid faces fewer regulatory hurdles due to their political connections, including ties to former US President Donald Trump.