On December 22, Warner's acquisition showdown! Paramount's "cash capability" is significant, Netflix may take a $2.8 billion breakup fee to exit

Warner Bros. Discovery has become the focus of Hollywood's most intense acquisition battle, as Paramount Global disrupts Netflix's previously reached deal with a bid of $30 per share, pushing the final acquisition price potentially far beyond the $30 target set by Warner Bros. Discovery CEO David Zaslav.

Paramount CEO David Ellison explicitly stated in regulatory filings on Monday that its $30 per share bid, totaling $108 billion (including debt), is not the "best and final" offer. The Financial Times reported on Friday, citing analysts' predictions, that if negotiations are restarted, Paramount may raise its offer to around $32 per share, a level that will test Netflix's willingness to counter.

Since rumors of Netflix's interest in acquiring Warner Bros. Discovery emerged in September, its market value has evaporated by about 20%, losing approximately $100 billion. Analysts believe that facing competition from Paramount, Netflix may now have a decent exit opportunity—collecting a $2.8 billion termination fee while avoiding regulatory scrutiny risks.

The Warner Bros. Discovery board must respond to Paramount's proposal by December 22, which will determine the final direction of this acquisition battle in Hollywood.

Bidding Prices Continue to Rise, Paramount Prepares to Increase Offer, Possibly to $32

Reports indicate that Paramount Global's current offer of $30 per share has already sparked market expectations for further price increases. CreditSights analysts predict that if negotiations are restarted, Paramount may raise its offer to around $32 per share.

Insiders from the Warner camp stated, "I thought the last episode of the streaming series aired last week, but now it seems we've been renewed for another season. Compared to 18 months ago, the deal prices we are discussing now have reached highs of over $20 and even lows of over $30, which is quite astonishing."

Paramount CEO David Ellison clearly stated in regulatory filings that his offer is not "best and final," leaving room for further increases. If Paramount raises its offer to $32 per share, it may need to raise more capital, asking its Middle Eastern sovereign wealth fund supporters to increase their existing $24 billion equity contribution.

Netflix Faces Strategic Dilemma, $2.8 Billion Termination Fee Becomes a Relief Opportunity

By initially pursuing Warner Bros. Discovery, Netflix signaled to investors that it needs this deal to maintain long-term growth momentum, putting pressure on CEO Ted Sarandos to continue the bidding.

WBD's advisors stated "cash is king," meaning investors would expect Netflix to convert its originally "part stock, part cash" offer into a pure cash acquisition. If this happens, Netflix would need to borrow about $50 billion in new debt, potentially losing its investment-grade credit rating.

However, Paramount's price increase also provides Netflix with a decent exit opportunity. Analysts believe that Netflix can claim to appreciate these assets but refuse to overspend, while also avoiding a lengthy and potentially risky regulatory review, and still collect a $2.8 billion termination feeNetflix's current offer only covers studio and streaming assets, with a valuation of $27.75 per share in cash and stock. Advisors to Warner Bros. Discovery stated that "cash is king," meaning investors expect Netflix to convert part of its stock offer into an all-cash offer, but this would put Netflix at risk of losing its investment-grade rating.

Various Parties Seek a Win-Win Outcome

Bankers involved in multiple hostile takeover deals indicated that there is a situation where all parties can gain: Paramount moderately raises its offer, Netflix withdraws, and the merged Paramount-Warner Bros. Discovery agrees to provide Netflix with exclusive content for a set period, allowing both sides to declare victory in this battle that neither can afford to lose.

The choice of the Warner Bros. Discovery board may depend on how traditional television assets—such as CNN and other cable networks—are valued. If the Netflix deal goes through, these assets will be left to shareholders.

Bank of America analysts' optimistic assessment in September valued these channels at about $5 per share, making Netflix's offer appear stronger relative to Paramount's. However, Paramount believes the true value of these declining television networks is closer to $1 per share, thus changing the calculations