David Ellison, CEO of Paramount Skydance, speaks at the Bloomberg Screentime conference in Los Angeles on October 9, 2025.
Patrick T. Fallon | Afp | Getty Images
Paramount Skydance has already informed Warner Bros. Discovery that it believed its acquisition offer at $23.50 per share was in the best interests of shareholders. He must now plan what to do if the WBD board disagrees.
WBD is openly for sale and intends to publicly announce its plans in mid-to-late December, according to people familiar with the matter, who asked to remain anonymous because the discussions are private. The media giant, led by CEO David Zaslav, is deciding whether to split the company in two, sell some assets or sell the entire company.
Paramount has sent several letters to WBD’s board explaining why its offer is more attractive to shareholders than spinning off the company, signaling that negotiations could become more aggressive if WBD pursues other options. CNBC reviewed copies of two of the letters.
Part of a letter from Paramount dated Oct. 13 specifically details the company’s argument that its latest offer of $23.50 per share “provides superior value” to WBD shareholders compared to any reasonable plan to break up the company.
About a week after receiving that letter, WBD said it would begin “a comprehensive review of strategic alternatives to identify the best path forward to unlock the full value of our assets.”
The sales process was officially launched after WBD announced in June that it would split into two companies: a streaming and studio company called Warner Bros., which would include the WBD movie properties and streaming service HBO Max, and a global networks company called Discovery Global, which would be home to CNN, TNT Sports and Discovery, among other businesses. Both companies would be listed on the stock exchange on their own initiative.
The strategic options are not mutually exclusive. Given the regulatory approval process is expected to take a year (or more), splitting the company in two and then selling one or both parts would be the most tax-efficient means of sale, according to people familiar with the matter. The split, which is expected to be finalized by April, is a tax-free transaction.
Comcast And Netflix have expressed interest in acquiring the studio and streaming assets, CNBC previously reported. If Warner Bros. Discovery decides the best way to create value is to sell Warner Bros., and plans to make the announcement in December, before the split occurs, the people close to the deal said.
Comcast Chairman Mike Cavanagh said during the company’s earnings report last week that such an acquisition would be complementary to its post-Versant NBCUniversal business.
Warner Bros. Discovery is expected to announce its third-quarter results Thursday morning.
Paramount’s hostile decision
Warner Bros. Discovery rejected three different offers from Paramount for a full takeover of the company. The latest, priced at $23.50 per share, was 80% cash and 20% equity, CNBC reported last month.
Paramount executives are willing to wait and see if the Warner Bros. board of directors agrees. Discovery is deciding to engage in friendly discussions about the sale, according to people familiar with the company’s thinking.
But if WBD procrastinates in its decision or decides to go in a different direction, Paramount has considered making an offer directly to shareholders and formalizing a hostile bid for the company, the sources said.
Warner Bros. Discovery asked Paramount to sign a nondisclosure agreement that included a standstill clause that would prevent Paramount from launching a hostile takeover bid in exchange for access to its data room, according to people familiar with the matter. Paramount did not sign the NDA to keep its options open, one person said.
Warner Bros. spokespeople Discovery and Paramount declined to comment.
If Paramount appeals directly to shareholders, it will argue that its offer is higher than Warner Bros.’ closing price. Discovery on September 10, the day before the Wall Street Journal announced that Paramount was preparing a bid for the company. Warner Bros. Discovery closed at $12.54 per share on September 10. An offer of $23.50 per share is 87% higher than the so-called unaffected stock price.
Warner Bros. Discovery will have to convince its shareholders that spinning off the company or merging one of its units with another entity, such as NBCUniversal, is more shareholder-friendly than an outright sale.
Paramount has already exposed the calculations to Warner Bros. Discovery in the October 13 letter obtained by CNBC. Here is the argument of the letter, addressed to the board of directors of Warner Bros. Discovery and signed by David Ellison, Chairman and CEO of Paramount Skydance:
“We understand that you and your management team are optimistic about the potential value creation resulting from your planned spin-off. However, a more objective analysis yields significantly lower results than the consideration given to WBD shareholders in our proposal. We analyzed the value of the planned spin-off to WBD shareholders at the end of 2028 based on optimistic assumptions, including:
- Warner Bros. outperformed consensus EBITDA by approximately $500 million (10%) and trades at the same multiple as Disney, despite the iconic global enterprise that Disney represents across its entire business.
- Discovery Global achieves consensus EBITDA, despite significant headwinds, and trades in media reports for “sum of the parts” multiples of analyst research for the company.
- An illustrative bonus of 25 to 40% in terms of mergers and acquisitions applied to Warner Bros.
Based on these assumptions, the planned split would generate a current value for WBD shareholders of less than $15 per share on a commercial basis, or between $18 and $20 per share, including a robust, but highly uncertain, M&A premium for Warner Bros.
Paramount’s assumptions are not necessarily in line with those of WBD or third-party equity analysts, including Jessica Reif Ehrlich of Bank of America, who estimates a buyout value of $26 per share for Warner Bros. and $4 per share for Discovery Global, according to an Oct. 21 note to clients.
Regulatory uncertainty
Paramount can also argue that its deal for all of Warner Bros. Discovery is well-positioned to win regulatory approval, given President Donald Trump’s recent kind words about Ellison and his father, Larry, who is one of the world’s richest people and could contribute tens of billions of his own money to help finance a transaction.
“I think you have a great new leader,” Trump said of David Ellison during a “60 Minutes” interview on CBS last week. “I think one of the best things that’s happened is this show and a new owner, CBS and a new owner. I think it’s the greatest thing that’s happened in a long time to a free, open, good press.”
In contrast, Trump has repeatedly criticized Comcast CEO Brian Roberts, including calling him a “thug” and a “slimeball.”
Some analysts have speculated that Comcast could try to strike a deal with Warner Bros. Discovery in which it would create NBCUniversal and merge it with the studio and streaming assets.
It’s unclear whether shareholders will be optimistic about the future prospects of Discovery Global or Warner Bros. as autonomous entities.
All of Discovery Global’s linear cable networks, such as TNT, TBS and CNN, are facing declining advertising rates on top of annual cable subscriptions falling by the millions.
Warner Bros.’ HBO Max and the Warner Bros. film studio. could command a significant M&A premium in a sale if Comcast, Paramount and Netflix are all potential buyers, but the price should be high enough to convince WBD shareholders that it’s a better option than selling the entire company.
However, even if Paramount decides to make an offer directly to shareholders, tender offers do not guarantee success.
A threshold of only 20% of Warner Bros. shareholders. Discovery who have held the shares for at least a year is required to call a special meeting to potentially combat a hostile bid, according to a company filing. Long-time shareholders of Warner Bros. Discovery can say that the current management and board of directors are the best managers of the company.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant would become the new parent company of CNBC in Comcast’s planned spinoff of Versant.