Warner Bros. Discovery Takeover Battle Escalates with Paramount-Led Opposition

What happened

Warner Bros. Discovery is in the midst of a complex merger-arbitrage scenario, with Netflix's agreed $27.75 per share acquisition of its Streaming & Studios business facing significant regulatory and political hurdles. This week, Paramount CEO David Ellison and a vocal investor intensified efforts to thwart Netflix's planned takeover, introducing direct competitive resistance to the already fragile deal. The DeepValue report underscores WBD's junk credit ratings, declining linear TV EBITDA, and heavy reliance on a risky spin-off of its Global Networks segment to manage over $34 billion in debt. With the stock trading at $28.49, slightly above the Netflix deal value, this new opposition amplifies uncertainty and could delay or derail the transaction amid antitrust scrutiny. Investors must now confront an increasingly contentious battle that heightens the probability of adverse outcomes for WBD's leveraged standalone operations.

Implication

Paramount's aggressive moves signal that regulatory and competitive pressures are mounting, which could prolong antitrust reviews and increase the risk of deal breakage or harsh remedies. This aligns with the bear case in the report, where a failed deal would expose WBD's junk-rated balance sheet and structurally declining linear business, potentially driving shares toward the mid-teens. Shareholders should brace for increased price swings as conflicting interests clash, possibly leading to lower bid valuations or extended timelines that erode time value. Monitoring regulatory updates and shareholder activism becomes critical, as the STRONG SELL rating highlights limited upside (only ~9% in the bull case) versus substantial downside risks. Given the skewed risk-reward, investors should avoid new positions at current levels and consider trimming existing holdings until a material discount to deal value emerges.

Thesis delta

The new opposition from Paramount and an investor does not alter the core STRONG SELL thesis but intensifies the already high regulatory and competitive risks, making a smooth deal closure less likely. It reinforces the report's emphasis on political headwinds and the fragile standalone fundamentals, suggesting that the probability of the bear case—where the deal breaks and shares fall sharply—has increased slightly. Investors should thus maintain a cautious stance, with the recommendation to sell or avoid exposure now more urgent given the added layer of uncertainty.