The future of Warner bros. Revelation remains in flux as a bidding war between Netflix and a Paramount SkyDance-Oracle group intensifies, sending ripples through media and tech stocks. Netflix currently has a tentative agreement to acquire the entertainment giant for approximately $78 billion, but a competing all-cash offer from Paramount SkyDance, backed by Larry Ellison, has thrown the deal into uncertainty [[2]]. Both companies are facing stock pressures as the battle unfolds, raising questions about the financial viability and ultimate shape of a potential acquisition.
The battle for Warner Bros. Discovery is proving to be a rocky one for potential buyers, and a sale may not be as straightforward as some hoped.
Netflix shares have dropped nearly 25% from their pre-bid levels, while Oracle, the financial backing for a competing offer, has seen its stock fall by almost 40%. Collectively, these fluctuations represent losses estimated at $100 billion and $360 billion, respectively.
Currently, Netflix appears to be in the lead, having received approval from Warner Bros. Discovery’s board for a $27.75 per share offer – a combination of cash and stock – contingent on the planned spin-off of the company’s cable assets next year. Valuations of that traditional broadcasting arm are widely divergent among Warner Bros. Discovery stakeholders, with some analysts estimating the value of a single share at just over $2. Based on that assessment, Netflix’s total offer comes to around $30 per share, or approximately $78 billion, before factoring in potential hurdles from antitrust regulators.
The acquisition battle intensified this week with a competing bid from Paramount SkyDance, backed by Oracle co-founder Larry Ellison and his son, David.
Paramount SkyDance submitted an all-cash offer of $30 per share to acquire Warner Bros. Discovery outright. This simpler structure has been welcomed by some Warner Bros. Discovery shareholders. However, the Ellison family still needs to convince the company’s board to terminate the Netflix agreement before any new deal can be signed. Until that happens, Netflix isn’t legally obligated to respond.
When the Ellison family initially made their offer privately last week, they stated the terms were not final and subject to change, suggesting an auction is very likely.
Differing Impacts on Netflix and Oracle
The declining stock prices of both Netflix and Oracle are impacting the two companies differently. The stock component of Netflix’s offer is relatively small and partially accounts for changes in the company’s share price. As a result, the implied value of the offer has decreased by less than 1% since it was made, despite Netflix’s stock falling 9%.
Netflix isn’t relying on issuing new shares to improve its offer. According to Bloomberg Intelligence, Netflix could increase the offer’s value by borrowing while maintaining a strong credit rating, as its current leverage is very low.
Increasing the price could push net debt above a psychological threshold of three times earnings (EBITDA). However, this wouldn’t be detrimental in the long run, as increased revenue, profits, and cash flow would help lower the leverage ratio again.
Netflix’s $72 billion bid for Warner Bros. Discovery is a significant move in the evolving media landscape.
One potential challenge for Netflix is the uncertainty surrounding the declining value of the cable business, known as Global Networks. Paramount argues its value doesn’t exceed $1 per Warner Bros. Discovery share, based on a 4.5x multiple of projected EBITDA for the twelve months ending October 2026. Global Networks carries substantial debt, so even a small change in its overall value will disproportionately affect the share price. In contrast, competitor AMC Networks is trading at a 5x multiple, and Warner Bros. Discovery shareholders hope Global Networks will achieve a similar valuation.
Commitment to Delivering Deal Value
The Ellison family has stated they’ve secured $41 billion in capital to support the deal, alongside private equity firm RedBird Capital Partners. This commitment is crucial to ensure funding even if other financial partners – including sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi, as well as Jared Kushner’s Affinity Partners – experience funding issues.
Paramount sought to preempt concerns about Middle Eastern countries holding a significant stake in a culturally and democratically important American media and news asset, clarifying that the sovereign wealth funds’ ownership stakes won’t grant any voting or management rights. Paramount asserts in its disclosures that this shields the deal from scrutiny by the Committee on Foreign Investment in the United States (CFIUS) on foreign investments.
However, if the regulatory structure becomes a political obstacle, the Ellison family’s commitment will be critical. Larry Ellison’s net worth fell by $25 billion yesterday, but remains at $258 billion – significantly more than the amount needed. Of course, he would still need to write a substantial check from his personal funds, requiring him to liquidate assets, something he’s likely capable of given his vast resources. The robustness of Paramount’s financing has been a long-standing point of discussion in previous negotiations with Warner Bros. Discovery before Netflix secured its deal, and remains a concern for the target company.
The substantial decline in the stock values of both parties may dampen investor enthusiasm. From an outside perspective, Oracle’s stock volatility doesn’t appear to benefit Warner Bros. Discovery and is likely to influence the situation. For Netflix, this deal will transform its image from a reliable tech company with low leverage to something quite different. While the share price drop doesn’t prevent it from improving its offer, it raises the question of whether it should.
