Paramount has reached a definitive merger agreement to acquire Warner Bros. Discovery in a transaction valued at $110 billion, it was announced Friday. The transaction still needs approval from WBD shareholders and has to pass regulatory scrutiny, but the companies expect the deal to close in Q3 2026, a three-month period that includes the start of the NFL regular season.
The all-cash $31/share merger also includes a $0.25/share “ticking fee” calculated daily and payable to WBD shareholders for every quarter the deal does not close “beginning after September 30, 2026.” Paramount also said it would pay WBD a $7 billion regulatory termination fee if the deal does not receive regulatory approval. That marks a $1.2 billion increase from the $5.8 billion fee included in Paramount’s original hostile tender offer and the previous winning bid by Netflix.
WBD CEO David Zaslav has reportedly admitted the possibility that the deal may not close. James Faris of Business Insider reported that Zaslav shared the regulatory approval process could take an additional six to 18 months during a company town hall on Friday. Although Paramount has claimed to have “no statutory impediment” to close a deal in the United States, state attorneys general could still try to block the deal via a lawsuit. The agreement is said to require approvals abroad as well.
“The deal may not close,” Zaslav said, per Business Insider. “If it doesn’t close, we get $7 billion, and we get back to work.” Zaslav was referring to a $7 billion regulatory termination fee, a figure Paramount increased from the $5.8 billion that it was offering in its hostile bid. Netflix provided the same figure within its merger agreement as well.
WBD’s board determined Thursday that the Paramount offer was “a ‘Company Superior Proposal'” over that of Netflix merger, after which Netflix — which had been pursuing only on the streaming and studio assets owned by Warner Bros. Discovery — bowed out of the bidding.
Both the Paramount and WBD boards of directors unanimously approved the transaction, which would create a company with a 7.5x multiple “on fully synergized 2026 EBITDA.” Paramount has said previously that it believes it can reach $9 billion in synergies when combining the WBD deal with the Paramount-Skydance merger. It remains unknown if that figure has shifted since the alterations to its offer that ultimately led to the definitive merger agreement.
“I’m very pleased with the outcome we achieved for WBD shareholders and the entertainment industry,” Zaslav said in a statement. “Our guiding principle throughout this process has been to secure a transaction that maximizes the value of our iconic assets and our century-old studio while delivering as much certainty as possible for our investors. We look forward to working with Paramount to complete this historic transaction.”
Paramount said that the combined company is going to “create a premier direct-to-consumer platform with enhanced reach, engagement, and monetization capabilities.” According to recent quarterly earnings reports, Paramount+ has 78.9 million paid subscribers, while HBO Max-owner WBD has 131.6 million streaming subscribers. If the merger is successfully completed, Paramount+, Pluto, HBO Max and discovery+ would be placed under one roof.
Paramount also touted the companies’ combined sports rights portfolio, spotlighting properties such as the NFL, PGA Tour, Big Ten Conference, NHL and NCAA College Basketball. CBS and TNT have worked together on presenting March Madness since 2011 are set to continue doing so through 2032, reportedly worth an average of $1.1 billion/season. Paramount said that the combined company would be able to distribute the rights across its platforms, but it is unclear how much flexibility its existing deals allow.
Netflix confirmed in an SEC filing Friday that WBD had terminated its merger agreement and that it received a $2.8 billion termination fee from Paramount, which had agreed to make the payment on WBD’s behalf. Netflix co-CEOs Ted Sarandos and Greg Peters said in a statement Thursday that the deal was “no longer financially attractive” and called the transaction “a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
The Netflix agreement would have paid WBD stockholders $27.75/share and left Discovery Global as its own standalone entity containing linear networks such as TNT, TBS, CNN and HGTV. Paramount said the cable portfolio would “significantly improve cash flow [and] unlock efficiencies,” along with “strengthening [its] ability to manage linear market pressures.”
The Paramount deal includes a debt commitment of $54 billion from Bank of America Merrill Lynch, Citi and Apollo (plus $3.5 billion in bridge financing), along with equity of $47 billion that is “fully backed by the Ellison Family and RedBird Capital Partners.” Oracle co-founder/CTO Larry Ellison agreed to backstop the entire offer rather than just the debt commitment, per a report by Benjamin Mullin and Lauren Hirsch of The New York Times. Ellison will also contribute more equity “to the extent needed to support the solvency certificate required by Paramount’s lending banks.”
Netflix granted WBD a seven-day waiver under which it could engage in talks about a deal with Paramount. The two sides were in the middle of a conversation but had to hang up the phone “at midnight on Monday because they were legally obligated to do so,” according to a report by Lucas Shaw, Michelle F. Davis and Josh Sisco of Bloomberg.
Shares of Netflix rose 13.8% on the market Friday and closed at $96.24, while Paramount shares finished up 20.8% to close at $13.51. WBD shares were down by 2.2% in trading Friday, finishing at a close price of $28.17.
