Lights, Camera, Acquisition: Analyzing Netflix and Paramount’s Bidding War to Acquire Warner Bros.

In June 2025, Warner Bros. Discovery Inc. (“WBD”) revealed that it would separate its Global Networks division from its Streaming and Studios division. WBD’s Streaming and Studios division includes its television and movie studios (Warner Bros. Television, Warner Bros. Motion Picture Group, HBO, DC Studios, etc.), its streaming platform (HBO Max) and its vast media library. WBD’s Global Networks division includes its global linear cable network properties such as CNN, TNT Sports, TBS, HGTV, Food Network and Discovery. The Global Networks division also encompasses several free-to-air channels across Europe and digital products such as Discovery+ and Bleacher Report. The separation would result in Global Networks being spun off into its own publicly traded company, Discovery Global, in Q3 2026.

Following the announcement, WBD received a number of unsolicited acquisition offers from various major media conglomerates, all of which were rejected. In October 2025, WBD signalled that it was reconsidering a potential sale and exploring a broad range of alternatives.

The Netflix Proposal

On December 5, 2025, Netflix Inc. (“Netflix”) announced its plan to acquire WBD’s Streaming and Studios division in a mixed cash and stock deal with a total enterprise value of $82.7 billion (equity value of $72 billion), valuing WBD shares at $27.75 per share (all figures in U.S. dollars).

Netflix is currently the world’s largest paid streaming service with more than 325 million subscribers. To date, Netflix’s growth has primarily resulted from organic expansion and selective acquisitions involving small-to-medium-sized transactions. The company has long adhered to a “builders, not buyers” philosophy but is now making a significant shift toward blockbuster M&A. This strategic pivot is driven in part by the evolving media and entertainment landscape. Over the past several years, competition for consumer attention has steadily intensified while consolidation and service-bundling have occurred across the industry.

Netflix’s proposed acquisition is expected to help the subscription video-on-demand giant retain and attract more subscribers by increasing its production capabilities and leveraging WBD’s marquee content from classic films such as Casablanca to major franchises like Harry Potter. While the proposal received unanimous approval from Netflix’s and WBD’s boards of directors, the transaction must still proceed through certain steps before closing, including receiving approval from both WBD shareholders and regulatory authorities.

The Paramount Rivalry

Other major players also expressed interest in WBD. The most notable is Paramount Skydance Corp. (“Paramount”), which has been engaged in a back-and-forth bidding war with Netflix over the past two months. On December 8, 2025, following the announcement of Netflix’s proposed deal, Paramount launched a hostile takeover bid for the entirety of WBD, including both its Global Networks and Streaming and Studios divisions. The bid totalled $108.4 billion, all in cash, valuing the company at approximately $30 per share. In comparison to Netflix’s $27.75 share valuation to purchase just the Streaming and Studios division, the value of the Global Networks division would have to be less than $2.25 per share in order for Paramount’s $30 per share valuation to be a superior offer.

The WBD board rejected the Paramount offer, citing concerns over financing and associated risks. Paramount subsequently revised its bid to include $40 billion in irrevocable financial backing from Larry Ellison, the father of Paramount CEO David Ellison. The WBD board again encouraged shareholders to reject the offer, stating that Netflix’s offer provided greater value, higher certainty and more favourable financial terms. On January 12, 2026, Paramount announced that it would proceed with its hostile bid and initiated a proxy fight by filing a lawsuit against WBD to compel disclosure of details related to the Netflix offer. Paramount also signalled its intent to nominate directors to the WBD board.

In response, on January 20, 2026, Netflix announced that it was revising its bid to be an all-cash offer. Under the original proposal, the $27.75 share valuation consisted of $23.25 in cash and $4.50 worth of shares of Netflix common stock. The revised offer aims to expedite the closing by simplifying execution and providing stockholders with certainty of value rather than exposing them to fluctuations in Netflix’s stock prices. Netflix expects the WBD shareholders to vote on the proposal as early as April 2026. In an effort to attract additional tendered shares, Paramount responded by extending its offer deadline by nearly a month to February 20, 2026.

Regulatory Considerations

From a regulatory standpoint, the Department of Justice (“DOJ”) will oversee the review of the Netflix-WBD merger as well as the investigation into Paramount’s hostile takeover bid for WBD. On February 3, 2026, the U.S. Senate Judiciary Committee held a congressional hearing at which Netflix’s Co-CEO, Ted Sarandos, and WBD’s Chief Strategy Officer, Bruce Campbell, testified and answered questions regarding the transaction. Sarandos outlined a number of ways in which the merger would strengthen the American entertainment industry, citing the following points:

• Netflix plans to increase its film and television production spending in the U.S., highlighted by an approximately $900-million New Jersey production facility in development that is projected to create jobs and economic opportunities.
• The WBD merger would provide consumers with more high-value content for less, as currently 80% of HBO Max subscribers are also subscribed to Netflix.
• Netflix has a relatively low “price-per-hour” metric (subscription price versus average hours watched) compared to competitors.
• Following the merger, WBD’s film and television studies would continue to run their production and operations separately from Netflix.
• To assuage concerns of the movie theatre industry, Netflix has pledged that all WBD feature films will have a 45-day theatrical window before appearing on a streaming platform.

While the final ruling will rest with the Federal Trade Commission and the DOJ, the hearing has provided a preview of the issues that the review authorities will consider in the process of their decisions.

Ultimately, if financing falls through or the transaction fails to receive regulatory approval, Netflix will be required to pay a historically large $5.8-billion breakup fee to WBD. At approximately 8% of the deal’s equity value, this fee significantly exceeds the average in comparable M&A transactions and ranks among the largest of its kind. The size of the fee reflects the intensity of the bidding war and Netflix’s confidence in its ability to close. Conversely, WBD would be required to pay Netflix a $2.8-billion reverse breakup fee should its shareholders vote to reject the deal.

The Sports, Media & Entertainment Group at Aird & Berlis LLP assists clients in navigating contracts, transactions, regulations, disputes and more. Please contact the authors or a member of the group if you have questions or require assistance.