Paramount Skydance recently boosted its bid for Warner Bros. Discovery to $31 per share and elevated the termination fee to $7.0 billion from $5.8 billion, escalating a takeover contest that places pressure on the streaming giant that has an existing pact with Warner Bros.
The revised proposal from Paramount Skydance is structured to challenge the standing deal between Warner Bros. and Netflix, and if Warner Bros.’ board concludes the new offer is superior, Netflix would have a four-day window to respond under the terms that govern the companies' agreement.
Under the current arrangement, Netflix has offered $27.75 per share for Warner Bros’ studios and HBO Max streaming operations, while Warner Bros. has signaled plans to separate its traditional television division into an independent company. Paramount’s proposal differs in scope: it seeks to acquire Warner Bros. in full.
Analysts at Bernstein, including Laurent Yoon, examined the options open to Netflix and concluded that the streaming service has both the balance sheet capacity and forecasted free cash flow growth to credibly raise its offer for Warner Bros into the $30-per-share range. Bernstein’s team highlighted projected synergies from the combination estimated at $1.5 billion by 2028, a figure they characterized as roughly 50% of the operating expense reductions Netflix is targeting as part of its integration plan.
Despite that financial flexibility and the potential cost savings, Bernstein’s analysts cautioned that these considerations alone do not obligate Netflix to increase its bid. The firm emphasized Netflix’s established reputation for disciplined capital allocation - a point management has repeatedly underscored - and argued that if the revised price no longer meets Netflix’s internal return thresholds, walking away would remain a defensible strategic choice.
"Netflix has built a reputation for disciplined capital allocation -- a point management has emphasized repeatedly. If the price tag no longer makes sense for Netflix, and if this deal is likely to hinder Paramount Skydance-Warner Bros to invest aggressively in growth near-term, walking away remains a perfectly rational outcome," the analysts said.
The contest between bidders raises questions for market participants about valuation and priorities: whether to pursue scale and intellectual-property synergies now, or preserve financial flexibility and adhere to strict allocation criteria. The outcome could alter the ownership and strategic direction of valuable franchises controlled by Warner Bros., including major studio assets and the HBO Max streaming business.
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Should Warner Bros.’ board determine Paramount Skydance’s revised proposal is superior, Netflix will face a limited timeframe to decide whether to counteroffer or step aside. Bernstein’s assessment frames that decision as a trade-off between the capability to outbid and the prudence of staying within disciplined capital allocation limits.