Paramount and WBD make $110bn merger official, set Q3 for deal to close

David Zaslav (left) and David Ellison

David Ellison’s Paramount Skydance has confirmed its definitive agreement to acquire Warner Bros Discovery (WBD) in its entirety for US$110bn after Netflix dramatically bowed out on Thursday.

The companies said on Friday they expect the US$31-per-share all-cash deal to close in the third quarter of 2026.

The boards of both have already given unanimous approval, with WBD shareholders to vote on the transaction in the spring. The mega-merger must still secure regulatory approval with various bodies in the US and Europe, while some American states, including California, have indicated they may attempt to sue on anti-competitive grounds to block the deal.

WBD and Paramount confirmed that they expect to make US$6bn in cost savings through a combination of “technological integration,” including consolidating its streaming tech stacks, and “corporate-wide efficiencies.”

The lay-offs are expected to be extensive given WBD and Paramount have multiple overlapping business units, and come on the heels of Paramount eliminating some 2,000 roles after Skydance bought Paramount in an US$8bn deal last year.

Netflix has argued that Paramount’s cuts will be closer to US$16bn, given the enormous level of combined debt the merger WBD-Paramount entity will carry.

Netflix had been set to acquire WBD’s studio and streaming businesses for US$82.7bn, with WBD’s global networks division being spun off into a separate company called Discovery Global. With the termination of the Netflix agreement, the launch of Discovery Global has been scrapped, a WBD representative confirmed to C21.

Paramount ultimately clinched WBD by adding a series of sweeteners. The decisive deal revisions included raising the price to US$31 per share, as well as committing to a 25¢-per-share quarterly increase if the deal doesn’t close by September 30; agreeing to pay a US$7bn fee to WBD in the event the deal isn’t approved by regulators; covering a potential US$1.5bn debt refinancing cost; and agreeing to pay a US$2.8bn termination fee to Netflix.

On Friday, Netflix disclosed in a securities filing that Paramount had already paid the US$2.8bn termination fee.

Paramount’s industry-reshaping deal includes US$47bn in equity backed by the Ellison family and RedBird Capital Partners and US$54bn of debt from Bank of America, Citigroup and Apollo.

The transaction brings together Paramount assets and brands such as Paramount Pictures, Paramount Television Studios, CBS Studios, CBS, Nickelodeon, MTV, BET, Comedy Central, Showtime, Paramount+ with WBD’s Warner Bros Motion Picture Group, Warner Bros Television Group, Warner Bros Pictures Animation, HBO, HBO Max, Discovery Channel, HGTV, Food Network, OWN, Investigation Discovery, TLC and CNN.

WBD president and CEO David Zaslav addressed the deal during a town hall on Friday, telling staffers that they were the “envy of the industry.” According to reports, the address was not well received, given that WBD leaders had spent three months talking about the benefits of the Netflix merger, and that executive team sounded somewhat shaken by a sale process that Zaslav described as “whiplashy.”

With the fate of WBD resolved, the share prices of both Netflix and Paramount have started to recover. Paramount stock had dipped from more than US$19 per share in September to US$10 by last week but has since climbed to US$13.50. Netflix, meanwhile, saw its stock tank from US$123 per share in October to around US$76 last week. Since it bowed out of the running, its stock price has risen 23% to US$96 per share.

Paramount leaders will take part in a conference call discussing the WBD deal on Monday at 8.30am ET.

“From the very beginning, our pursuit of Warner Bros Discovery has been guided by a clear purpose: to honour the legacy of two iconic companies while accelerating our vision of building a next-generation media and entertainment company,” said Paramount chairman and CEO Ellison.

“By bringing together these world-class studios, our complementary streaming platforms, and the extraordinary talent behind them, we will create even greater value for audiences, partners and shareholders – and we couldn’t be more excited for what’s ahead.”

Zaslav added: “Our guiding principle throughout this process has been to secure a transaction that maximises 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.”