What do you know about the Warner Bros. auction? Historical Discovery

The streaming and entertainment industry has just witnessed one of the riskiest mega deals ever, astounding industry observers. Not only is it historic in its scale, it is also expected to disrupt Hollywood and the media business as we know it.

After years of struggling Warner Bros. Discovery Under the weight of billions of dollars in debt, coupled with declining cable viewership and fierce competition from streaming platforms, the company has been considering major strategic changes, including selling its entertainment assets to a competitor.

Several major players saw potential in the media giant, and in December, Netflix announced that it would acquire WBD Studios and streaming for $82.7 billion.

But in a surprise eleventh-hour move this month, David Ellison’s Paramount now looks set to be the winner of that bidding war, offering $111 billion to acquire all of Warner Bros. Discovery’s assets, including its studios, HBO, streaming and gaming platforms, and TV networks like CNN and HGTV. Ellison recently acquired Paramount with heavy support from his father, Oracle Chairman, the world’s sixth-richest person, and major Trump donor Larry Ellison.

Paramount’s bid is still awaiting formal approval from WBD’s board of directors, and any potential agreement could also face pressure from regulators.

Let’s break down exactly what’s happening, what’s at stake, and what could happen next.

What happened so far?

It all started back in October when Warner Bros. revealed Discovery (WBD) said it was exploring a potential sale after receiving unwanted interest from several major players in the industry.

The bidding process quickly became competitive, and Paramount and Comcast emerged as serious contenders, with Paramount initially viewed as the front-runner.

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

And so the bidding war began. Paramount believed its offer, about $108 billion for all of Warner’s assets, was superior to Netflix’s, which focused on studios and streaming alone. To sweeten its deal, Netflix amended its agreement in January to an all-cash offer at $27.75 per share in Warner Bros. Discovery, which reassures investors and paves the way for the deal to move forward.

Paramount continued its attempts to acquire WBD. However, Warner’s board has repeatedly rejected her offers, citing concerns about Paramount’s heavy debt burden and the heightened risks associated with its proposal, including concern about the group of investors financing Paramount’s bid, which includes the sovereign wealth funds of Saudi Arabia, Qatar and Abu Dhabi. The board noted that Paramount’s offer would have left the combined company with $87 billion in debt, a risk the company was not willing to take at the time.

In January, Paramount filed a lawsuit seeking more information about the Netflix deal. A month later, the company sought to sweeten its deal by announcing that it would offer a $0.25 per share “recording fee” to WBD shareholders for each quarter the deal failed to close by December 31, 2026. It also said it would pay a $2.8 billion breakup fee if Warner backed out of its deal with Netflix.

Then, in a last-ditch effort to secure the deal, Paramount increased its offer to $31 per share in February. This prompted WBD’s board of directors to prolong discussions with Paramount over a potential agreement, viewing it as a superior offer. Netflix refused to increase its offer and withdrew from negotiations.

“The deal we negotiated would have created value for shareholders with a clear path to regulatory approval,” Ted Sarandos and Greg Peters, Netflix’s co-CEOs, said in a statement on February 26. “However, we have always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we decline to match Paramount Skydance’s offer.”

In addition to the billions in debt Paramount already holds, the company is also set to assume approximately $33 billion in debt held by Warner Bros. Discovery under the agreement. The deal will be backed by a $54 billion debt commitment from Bank of America Merrill Lynch, Citi and Apollo Global Management, as well as $45.7 billion in equity from Larry Ellison.

Regulatory hurdles and other concerns

In addition to assuming significant debt that poses a significant financial burden, Paramount faces several other hurdles in its deal with WBD that could impact the success of the deal.

For example, Ellison warned of major job cuts expected in the near future. There have already been widespread concerns among critics about potential job losses and lower wages.

Ellison is also a controversial figure in the industry, and his ownership of CBS News is seen as sympathetic and supportive of the administration of Donald Trump, whose father, Larry Ellison, is a major donor. Under Ellison’s ownership of Paramount, reports critical of management were shelved or received increased scrutiny from Ellison or his designated CBS News president, conservative provocateur Barry Weiss.

This has led to some concern among employees at Warner-owned CNN. Trump personally sought concessions from news departments critical of him, including a $16 million settlement from CBS, before the FCC approved Ellison’s acquisition of Paramount. Before Netflix withdrew from the deal, Trump pressured the company to remove Susan Rice, a former White House official under Biden, from its board of directors. He has publicly announced his intention to bring CNN under new owners.

Regulatory scrutiny is another hurdle. Such a large-scale merger has attracted the attention of lawmakers.

For example, California Attorney General Rob Bonta said in a statement on February 26 that “these two Hollywood giants have not passed regulatory scrutiny — the California Department of Justice has an open investigation, and we intend to be active in our review.”

A day before Netflix backed out, it was revealed that a coalition of 11 state attorneys general had urged the US Department of Justice (DOJ) to review the merger amid concerns it would stifle competition and raise subscription prices. This comes months after US Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal expressed their concerns to the Justice Department’s antitrust division, warning that such a massive merger could have dire consequences for consumers and the industry in general. The senators argue that the merger could give the new media giant excessive market power, enabling it to raise prices for consumers and stifle competition.

However, Ellison’s father, Oracle Chairman Larry Ellison, is a significant Trump donor with close ties to the Trump administration. His deal to acquire Paramount last year was quickly completed after he agreed to c

When is the deal expected to close?

The deal is not final yet.

Initially, the deal with Netflix was expected to result in a shareholder vote around April, and the deal is expected to close within 12 to 18 months after that vote. However, the move to Paramount’s deal would likely create a new timeline for approval. Additionally, regulatory approvals are still pending, and an audit could shape the final outcome.

Stay tuned…