Twist in tale? Warner Bros weighs Paramount offer that covers $2.8bn Netflix break fee, says report

Warner Bros. Discovery is weighing whether to reopen negotiations with Paramount Skydance Corp. after the rival studio submitted amended terms aimed at reviving a takeover bid. The move could reignite a high-stakes contest with Netflix for one of Hollywood’s most valuable content libraries, Bloomberg reported on Monday, citing people familiar with the matter.

Board members have been discussing whether Paramount could offer a superior deal, the people said, even as Warner Bros. remains bound by a signed agreement to sell its studio and HBO Max streaming business to Netflix, according to Bloomberg. No decision has been made, and directors are still considering how to respond.

Paramount Skydance’s revised offer targets Netflix's break fee and Warner Bros. debt concerns

Paramount’s amended proposal, submitted last week, attempts to resolve some of the most contentious obstacles that had previously hindered negotiations.

According to people with knowledge of the matter, Paramount offered to cover a $2.8 billion termination fee owed to Netflix if Warner Bros. walks away from its existing agreement. The company also proposed backstopping a Warner Bros debt refinancing, addressing concerns about leverage and funding stability.

Paramount further said it would compensate Warner Bros. shareholders if the deal did not close by 31 December, signalling confidence that regulators would approve the transaction swiftly.

The board’s calculation: Leverage Paramount to force a sweeter Netflix deal

While Warner Bros. still has reservations about Paramount’s approach — many of which have been previously aired in public statements — the latest shift has altered the board’s internal assessment. For the first time, directors have been debating whether Paramount’s offer could not only lead to a better deal on its own terms but also pressure Netflix into improving its price.

Warner Bros. has already agreed to sell its namesake studio and HBO Max streaming business to Netflix in a deal priced at $27.75 a share.

Yet Paramount, which owns CBS and MTV, has sought to bypass the board by appealing directly to shareholders, including through a $30-a-share tender offer, while separately lobbying regulators to keep its bid viable.

Both Paramount and Netflix have signalled a willingness to raise their bids if negotiations move into a more formal auction phase again, according to people familiar with the matter.

Shareholders push Warner Bros. to at least engage

Warner Bros. has faced growing pressure from shareholders to engage with Paramount rather than rush to lock in the Netflix transaction without exploring alternatives.

Several investors, including Pentwater Capital Management and Ancora Holdings Group, have publicly argued that the board should reopen talks. However, Paramount’s tender offer has so far gained little traction: just 42.3 million shares were tendered at last count, less than 2% of those outstanding.

Investors watch for ‘creative’ deal structure and a higher price

Market observers say Paramount’s revised terms appear designed to solve structural obstacles rather than immediately raise the headline price — a tactic that may be intended to keep the bid financially disciplined while still improving its attractiveness.

Chris Marangi, co-chief investment officer at Gabelli Funds, said that while he was a bit disappointed Paramount didn’t raise its offering price this week, the latest changes to the terms suggest the company is finding “ways to be creative about structuring a deal.”

“Like the Warner Bros. board, I want to see a sweetened offer,” said Marangi, whose company owns Warner Bros. shares.

What happens next if Warner Bros. re-engages Paramount

Any formal re-engagement with Paramount would trigger a defined process under the Netflix agreement. Warner Bros. would first need to notify Netflix, after which the board could seek improved terms from Paramount — likely pushing the bid beyond $30 a share.

If the board ultimately determined Paramount’s proposal constituted a superior offer, Netflix would retain the right to match it.

A bidding war that never fully ended

Paramount originally triggered the auction of Warner Bros. last year with an unsolicited offer and subsequently increased its price several times before ultimately losing to Netflix.

Since then, Paramount leadership has continued to argue that its offer is strategically stronger, while quietly courting regulators and shareholders to keep the door open.

Paramount Chief Executive Officer David Ellison has said the current offer isn’t his final bid, while Netflix’s leadership has told shareholders it could go higher as well.

Both companies, however, are wary of overpaying. Shares of Netflix have fallen more than 40% from their June peak as investors have grown anxious about the scale and risk of the Warner Bros transaction.

Warner Bros. races towards a shareholder vote amid uncertainty

Warner Bros. has been moving quickly to schedule a shareholder vote on the Netflix agreement, a step that would make it harder — though not impossible — to reverse course.

But Paramount’s amended offer has introduced a new variable into what had appeared to be a closing stretch. For Warner Bros., the decision now is whether to treat Paramount’s bid as a genuine alternative — or as leverage to extract better terms from Netflix.

Either way, the latest manoeuvre suggests that the deal for Warner Bros., one of the most consequential media assets in the United States, may still be in play.