What you need to know about Warner Bros.’ landmark Discovery Sale

The streaming and entertainment industry witnessed its most high-stakes mega-deal ever, surprising industry insiders. Not only is its scale historic, it is predicted to disrupt Hollywood and the media business as we know it.

Warner Bros. Discovery has struggled for years with declining cable viewership, fierce competition from streaming platforms and billions of dollars in debt, but the company has been considering major strategic changes, including selling entertainment assets to rivals.

Several major companies see potential in acquiring the media giant, with Netflix announcing in December that it would acquire WBD Studios and Streaming for $82.7 billion.

But in a surprising 11th-hour move this month, David Ellison’s Paramount may actually be the winner of the bidding war, offering $111 billion to acquire all of Warner Bros. Discovery’s assets, including the studio, HBO, streaming platforms, games, and television networks such as CNN and HGTV. Paramount itself was recently acquired by Ellison, with significant support from his father Larry Ellison, the world’s sixth-richest Oracle chairman and a major donor to President Trump.

Paramount’s offer still awaits formal approval from the WBD board, and a potential deal could also come under pressure from regulators.

Let’s analyze exactly what is happening, what is at stake and what will happen next.

What happened so far?

This all goes back to October, when Warner Bros. Discovery (WBD) revealed it was considering a potential sale after receiving unsolicited interest from several of the industry’s biggest names.

The bidding process quickly became competitive, with Paramount and Comcast emerging as leading candidates, with Paramount initially considered the frontrunner.

However, WBD’s board ultimately decided that the offer from streaming giant Netflix was the most attractive. Netflix offered $82.7 billion for Warner’s film, TV and streaming assets alone.

Thus began the bidding war. Paramount believed its bid of about $108 billion for all of Warner’s assets was better than the offer from Netflix, which focuses solely on studios and streaming. To make the deal more favorable, Netflix amended the deal in January to an all-cash offer of $27.75 per Warner Bros. Discovery share, further reassuring investors and paving the way for the deal to proceed.

Paramount continued its attempts to acquire WBD. Still, Warner’s board repeatedly rejected the proposal, citing concerns about Paramount’s high debt and the increased risks associated with the proposal, including concerns about Paramount’s large debt burden and the array of investors funding Paramount’s bid, including sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi. The board noted that Paramount’s proposal would leave the combined company with $87 billion in debt, a risk it did not want to take at the time.

Paramount filed suit in January seeking more information about its deal with Netflix. A month later, the company softened the deal by announcing it would pay WBD shareholders a “ticking fee” of $0.25 per share for each quarter that the deal is not completed by December 31, 2026. It also said Warner would pay a $2.8 billion penalty if it backs out of its deal with Netflix.

Then, in a final attempt to get the deal, Paramount increased its offer to $31 per share in February. Therefore, the WBD board thought this was a good proposal and extended discussions with Paramount regarding a potential agreement. Netflix refused to raise its bid and withdrew from negotiations.

“The transaction we negotiated should have created shareholder value with a clear path to regulatory approval,” Netflix co-CEOs Ted Sarandos and Greg Peters said in a Feb. 26 statement. “We remain disciplined and decline to match Paramount Skydance’s bid as this transaction is no longer financially attractive at the price required to match Paramount Skydance’s latest offer.”

Paramount already has billions of dollars in debt, and under the deal it will also inherit Warner Bros. Discovery’s approximately $33 billion in debt. The deal is backed by $54 billion in debt commitments from Bank of America Merrill Lynch, Citi and Apollo Global Management, and $45.7 billion in equity from Larry Ellison.

Regulatory hurdles and other concerns

In addition to incurring significant debt, which represents a significant financial burden, Paramount faces several other hurdles in its transaction with WBD that could affect the success of the transaction.

As an example, Ellison warned of significant layoffs expected in the near future. Critics are already raising concerns about potential job losses and lower wages.

Ellison is also a controversial figure in the industry, as the owner of CBS News is seen as sympathetic to and supportive of President Donald Trump’s administration, and his father, Larry Ellison, is a major donor to the Trump administration. Under Mr. Ellison’s ownership of Paramount, reporting critical of the administration has been shelved or faced intense scrutiny from Mr. Ellison and his appointee to head CBS News, conservative firebrand Bari Weiss.

This raised concerns among employees at CNN, which is owned by Warner. President Trump has personally sought concessions from news organizations critical of him, including a $16 million settlement from CBS, before the FCC approved Ellison’s purchase of Paramount. Before Netflix pulled out of the deal, President Trump pressured the company to remove former Biden White House official Susan Rice from its board. He has publicly stated his intention to put CNN on the back foot under new ownership.

Regulatory oversight is also a hurdle. Such large-scale mergers are also attracting attention from lawmakers.

For example, California Attorney General Rob Bonta said in a February 26 statement: “These two Hollywood titans have not cleared regulatory oversight. The California Department of Justice is conducting an open investigation, and we will pursue it vigorously.”

The day before Netflix pulled out, it was announced that a coalition of 11 state attorneys general had asked the U.S. Department of Justice (DOJ) to review the merger, citing concerns that it would stifle competition and lead to higher subscription prices. This comes months after U.S. Sens. Elizabeth Warren, Bernie Sanders and Richard Blumenthal raised concerns with the Justice Department’s Antitrust Division, warning that such a large merger could have serious consequences for consumers and the industry as a whole. The senators argue that the merger could give the upstart media giants too much market power, raise prices for consumers and stifle competition.

However, Ellison’s father, Oracle Chairman Larry Ellison, is a major donor to Trump and has close ties to the Trump administration. His deal to buy Paramount last year closed quickly after acquiescing to C.

When is the transaction expected to close?

The deal is not yet final.

The deal with Netflix was originally expected to be subject to a shareholder vote around April, with the deal expected to close within 12 to 18 months after that vote. However, the move to a deal with Paramount will likely create a new timeline for approval. Additionally, regulatory approval is still pending and scrutiny could determine the final outcome.

stay tuned…