Inside the Fight for Warner Bros. Discovery – Netflix vs. Paramount [Part 3]

When Netflix and Paramount each made their offers for Warner Bros. Discovery (WBD), they did not simply bid different prices and hope for the best. Each side constructed their own complex, multi-layered transaction embedded with termination rights, regulatory safeguards, and risk allocation mechanisms that, in many ways, matter as much as the headline dollars do.

In this Part 3 of the series, we examine the principal legal and structural terms in both transactions to show how deal terms, not just valuation, can shape outcomes in such contested public transactions.

The Competing Deals

Netflix

Netflix's definitive agreement is deceptively straightforward on its face – a $27.75 per share in a blended cash and stock package, comprising $23.25 in cash and approximately $4.50 in Netflix common stock per share. But buried in the merger agreement is a sophisticated two-step transaction structure known as a spin-merge.

Paramount

Paramount’s hostile offer to purchase is structurally less complex than Netflix's – $30 per share, all cash, for 100% of WBD including the cable and networks assets that Netflix has declined to acquire.

The Crown Jewels

Netflix is not buying all of WBD so much as carving out the crown jewels for its streaming platform. But before Netflix can acquire its streaming and studios assets, WBD must first separate its linear television networks – CNN, TNT, TBS, and its European free-to-air channels – into a newly created, publicly traded entity to be called Discovery Global. Only after that spin is complete does Netflix step in to acquire the studios and streaming assets.

In contrast, Paramount is seeking to acquire all of WBD and its offer is conditioned on this separation not being consummated.

Bid Funding

Netflix

Netflix is funding the cash tranche of the consideration through a three-bank, $59 billion bridge loan facility led by Wells Fargo, alongside BNP Paribas and HSBC. The company intends to refinance this bridge with a $25 billion unsecured bond, $20 billion term loan, and a $5 billion revolving credit facility.

Paramount

On the debt side, Paramount has assembled a $54 billion bridge loan facility split equally among Bank of America, Citigroup, and Apollo Global Management, with each lender committing approximately $18 billion.

On the equity side, it has re-cut its investor line-up so that the core risk capital comes from domestic and politically palatable sources: the Ellison family, RedBird Capital and other U.S.-linked sponsors, with sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi pushed into a non-voting, non-controlling role.

Walking Away Is Expensive

Netflix

The merger agreement includes a $5.8 billion termination fee payable by Netflix if the deal fails to close due to regulatory objection or final non-appealable governmental orders blocking the transaction under antitrust or foreign regulatory laws.

Paramount

Paramount had backed up its bid with a $5 billion termination fee, payable by Paramount upon, among other things, termination for failure to obtain required regulatory approvals. It later raised this fee to $5.8 billion, matching Netflix’s promised payment, on 22 December.

Conditions Precedent

Netflix

Netflix has committed to an expansive "hell-or-high-water" covenant requiring the company to take all necessary steps to obtain regulatory clearance, including proposing divestitures, accepting operational restrictions, and litigating against any governmental orders seeking to block the transaction. There is, however, a critical carve-out: Netflix is not obligated to accept remedies constituting a burdensome condition or that would affect any business it may need to divest.

The company is also locked into a long runway: the agreement contemplates a 21-month outside date; 15 months plus two 3-month extensions if required regulatory approvals have not been obtained.

Deals of this scale highlight why boards depend on the best mergers and acquisitions lawyers to structure regulatory covenants, termination economics, and risk allocation mechanisms that can ultimately determine whether a transaction closes or collapses.

Paramount

In addition to shareholder acceptance and standard corporate approvals, closing in this case is conditioned on receiving antitrust and foreign investment clearances without any remedy that would amount to a “regulatory material adverse effect” on the combined business.

Paramount’s outside date is 18 months; 12 months plus two 3-month extensions if required regulatory approvals have not been obtained. This closing timeline reflects Paramount’s regulatory confidence and is also a selling point to shareholders: less time in limbo, less execution risk, and value delivered sooner.

Conclusion

Netflix offers a premium price wrapped in a spin-merge structure, with an oversized regulatory termination fee that insulates the board from antitrust blowback – but at the cost of a longer timeline and a buyer saddled with refinancing risk. Paramount counters with all-cash for the entire company, fully committed financing, and a shorter closing runway that minimises execution uncertainty. The competing structures demonstrate how, in contested public transactions, the strategic input of the best corporate lawyers often carries as much weight as valuation in guiding board decisions and managing execution risk.

In this case, Netflix has come out on top and the WBD board does not trust the Paramount deal, but regardless of the outcome, both proposals offer valuable insight into how sophisticated deal structuring and legal engineering can materially influence M&A outcomes.