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.
When Paramount first launched its hostile takeover bid, the WBD board called the offer “illusory” and accused the studio of misleading shareholders about its financing.
In response, Paramount announced on December 22, 2025 that Larry Ellison would personally guarantee $40.4 billion for Paramount’s offer to buy WBD. The Ellisons also committed to let WBD shareholders peer into the finances of their family trust for transparency.
As of January 7th 2026 however, the WBD board has formally rejected Paramount’s revised offer and has unanimously recommended that the WBD shareholders do the same. The board continues to back the Netflix merger transaction as a better deal for the shareholders.
In this Part 3 of the series, Ronin Legal examines 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 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, a form of legal engineering typically structured and negotiated by experienced mergers & acquisitions law firm and lawyers advising on complex public company transactions.
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.
WBD shareholders can accept or reject the offer; under Delaware law and Securities and Exchange Commission tender offer rules, WBD’s board must make a recommendation or determine that it is unable to make a recommendation within ten business days of Paramount’s announcement. As mentioned earlier, they have decided to continue with their recommendation of Netflix.
The Separation
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.
This structure lets Netflix do three things at once. It avoids taking on legacy cable assets that do not fit its strategy. It allows the market, in theory, to place a cleaner valuation on the high-growth streaming and content business. And it gives Warner’s board something sophisticated to point to when asked whether it has really maximised value, because shareholders end up holding stock in both the spun-off linear entity and Netflix itself, on top of the cash consideration.
In contrast, Paramount is seeking to acquire all of WBD and its offer is conditioned on this separation not being consummated.
Financing
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.
This debt load is substantial. Rating agencies have cautioned that Netflix’s leverage could spike above four times EBITDA through 2028 before declining. However, Netflix CFO Spencer Neumann has publicly committed to returning to investment-grade leverage within twenty-four months post-close, betting on rapid debt paydown and the realization of cost synergies.
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. That shift – and the quiet removal of more controversial participants such as Tencent – is not cosmetic. It is a targeted attempt to minimise national security and foreign influence concerns.
Termination Rights and Fees
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.
This represents approximately 8% of the deal’s equity value, a figure that dwarfs the market average of 2.4% for major M&A deals in 2024. This is thus an unambiguous signal that Netflix recognizes substantial antitrust friction and is willing to write a very large cheque if things go wrong.
By contrast, WBD faces a $2.8 billion termination fee if its board changes its recommendation to shareholders or if shareholders reject the transaction (subject to certain exceptions). The merger agreement also provides that either party may seek to compel the other party to specifically perform its obligations under the agreement.
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. As of the aforementioned December 22 announcement, Paramount raised this termination fee payable to WBD to $5.8 billion, matching Netflix’s promised payment. Their offer also imposes a fee of 3.75% of equity value (~$2.9 billion), payable by WBD upon, among other things, termination for a better offer.
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.
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.
That gives Paramount some room to walk if regulators insist on structural divestitures that, in its view, undermine the strategic logic of buying all of WBD, including the linear networks.
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 – the company believes it can secure the necessary approvals a full three months faster than Netflix’s upper-end limit.
That shorter runway is 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.
In this case, Netflix has come out on top and the WBD board does not trust the Paramount deal. Regardless of the outcome, both proposals offer valuable insight into how sophisticated deal structuring and legal engineering are assessed by every leading corporate law firm and lawyers when shaping and evaluating contested M&A outcomes.
Authors: Shantanu Mukherjee, Varun Alase
