Ellison's Persistent WBD Bid Reinforces Contested M&A Narrative Amid Financing Risks

What happened

Warner Bros. Discovery is entrenched in a contested M&A process, with Netflix's all-cash $27.75 per share offer and Paramount's competing $30 per share bid driving event-driven volatility as highlighted in the DeepValue report. A new CNBC article reveals that David Ellison's Paramount Skydance has been attempting to acquire WBD for nearly six months, underscoring persistent acquisition interest but also Ellison's rocky box office history, which raises execution concerns. This aligns with the report's emphasis on strategic alternatives, yet the stock trades at $28.065, above Netflix's deal price, eliminating the merger-arbitrage floor and making returns hinge on a higher bid or improved terms. Key catalysts include a shareholder vote expected by April 2026 and regulatory approvals, but delays could expose downside from financing constraints, such as the Bridge Loan Facility refinancing risk. Overall, the situation remains fluid, with Ellison's bid adding competitive pressure but no immediate resolution to the underlying operational and leverage challenges.

Implication

The persistent bid from Ellison's Paramount Skydance reinforces competitive pressure on WBD's board, potentially pushing for better deal terms, but his checkered track record signals integration challenges that might undermine long-term value if successful. From the DeepValue report, financing risks like the Bridge Loan Facility maturity and linear network declines remain critical headwinds, limiting standalone equity value without a timely transaction. Investors must closely monitor the shareholder vote by April 2026 and regulatory milestones, as slips could trigger a re-rating towards the $22 bear case due to heightened uncertainty. Entry points below $27.75 or after clear regulatory progress, such as certification of substantial compliance, are advised to improve risk-adjusted returns. Ultimately, this news underscores the event-driven nature of WBD, where patience and selective timing are key to navigating the contested M&A landscape.

Thesis delta

The new article does not materially shift the investment thesis from the DeepValue report, which already emphasizes waiting for a discount to the $27.75 deal price or clearer process milestones before committing capital. However, it reinforces the persistence of competing bids and highlights Ellison's execution risks, adding nuance to the assessment of Paramount's offer as a credible alternative. No fundamental change is warranted, but investors should remain vigilant on proxy vote dynamics and Ellison's bid progress as potential catalysts or red flags.