Paramount’s $110.9 Billion Bet: Bargain or Burden
Written by: Kenzo Wang, Angelique Meli, Efan Dang
Published: 12/10/2026
Right now, one of Hollywood’s calmest bets isn’t on a film, but on a 20-cent gap. On 21 September, Warner Bros Discovery closed at US$30.80, just below Paramount’s US$31 cash offer.
Merger arbitrageurs buy that gap and wait. If the takeover extends past 30 September, Paramount owes WBD shareholders a US$7 million daily "ticking fee." With the final legal challenge settled, the US$110.9 billion deal looks increasingly likely, shifting the risk towards whether Paramount can afford to own it.
Understanding that risk starts with a stranger question: why was a studio coming off one of its best years for sale at all?
Why a Hit Studio Was Up for Sale
Despite a successful year of blockbusters in 2025, Warner Bros Discovery’s (WBD) board elected to place the company up for auction on October 21st, 2025. This was largely due to the high amount of debt accrued from previous failed mergers, and the goal to maximise shareholder value.
There were bids submitted from Netflix, Comcast, and Paramount Skydance, across two rounds in November and December. Netflix’s bid was initially accepted, yet WBD re-entered negotiations with Paramount in February. A week later, Netflix withdrew their offer, and the following day WBD announced it had accepted Paramount’s new offer of $110.9 billion USD at $31 USD per share. The financing included $24 billion USD of funding from sovereign wealth funds based in the Middle East, namely Saudi Arabia, Qatar, and the UAE.
The Deal that Almost Didn’t Happen
After the original offer, the acquisition was somewhat controversial, with specific resistance from the Writers Guild of America (WGA) and 12 democratic-led American states. Issues raised focused on the risk of decreased competition within the film industry, as Paramount would have roughly 27 percent market share of theatrical film distribution and cable channel licensing. This developed into concerns about their news divisions’ (CBS News and CNN) ability to maintain neutrality and journalistic integrity. Paramount and the aforementioned States settled out of court on September 21st, whereby the company agreed to place safeguards that ensure competition and journalistic neutrality would be preserved. These safeguards included a commitment to produce 30-32 movies annually for the next five years, honour labour force agreements, create a News Editorial Independence Board to monitor editorial principles for the news channels, amongst others. The WGA abandoned their fight soon after, unable to afford a potential trial.
Can Paramount Keep Politics Out of the Newsroom?
One of the biggest concerns shared by the public and States is the impact of politics on the news channels. The CEO of Paramount Skydance, David Ellison, is a Trump ally and son of Oracle CEO Larry Ellison, who has ties to Israel. Given Paramount had already engaged in arguably politically motivated programming changes to their own CBS News, including the departure of late-night host Stephen Colbert and testimonial from ex-employees regarding journalistic censorship, many feared similar actions would be taken at CNN. Despite Paramount’s News Editorial Independence Board, such a board does not guarantee integrity, as similar attempts have failed in other news platform acquisitions, such as The Times and Wall Street Journal. Furthermore, the board of directors includes Paramount's Chair, David Ellison, with the ability to influence selections that favour his political opinion to be on the board.
Bigger Studio, Smaller Paychecks?
The other biggest concern, especially emphasised by the WGA, is the potential risks on the economy. WGA highlighted the merger violating antitrust laws due to its market share, providing similar-to-monopsony power over their writers. This gives Paramount the incentive and ability to lower writers wages and reduce production output, which would lower costs for the company. This risk is a threat to many workers and artists under this company, with the possibility of redundancy looming over employees’ heads. The proposed safeguards to address this, aforementioned above, involve a promise to spend $300 million USD on film production alone, with a penalty for nonperformance including Paramount being forced to sell Miramax Studios, and paying $30 million to worker unions’ health care and retirement trust funds. Whilst this is a significant, risky, penalty, Paramount has backing by one of the richest men in the world, Larry Ellison, so there are concerns the penalty is not great enough.
The $80 Billion Question
With the settlement on the 21st of September, the deal is expected to close in early October, subject to court approval. However, Paramount's challenges are not yet over.
Paramount's acquisition of Warner Bros Discovery (WBD) has major implications for its own risk. The planned debt sale totals about $52bn, including about $12bn in junk bonds (high yield risky bonds). This leaves the combined company with around $80bn in debt. Paramount plans to offset this by cutting over $6bn in costs through synergies (savings from combining the two companies) to bring leverage down to 3x within 3 years. However, cable TV is a shrinking market. Ultimately, the merger inflates debt, increasing costs while Paramount's plans to improve profits are uncertain, potentially leaving Paramount with less money for film-making.
Can Scale make Paramount a Streaming Giant?
Beyond its balance sheet, the deal may push Paramount into being a real challenger to Netflix and Disney in streaming. HBO Max and Paramount+ will be combined. The cited total of over 200m subscriptions includes Discovery+ and overlapping subscribers. While this is still less than Netflix's 300 million-plus paid memberships, it makes Paramount a much more serious competitor than before.
Ultimately, whether Paramount can cut costs faster than its cable business shrinks will decide if this deal is a bargain or a burden.
The Real Bet Starts Now
For arbitrageurs, the trade ends when the deal closes. For Paramount, the harder bet is just beginning. The market has already shown its doubts: Paramount fell on the settlement, while WBD jumped towards the US$31 offer.
Warner's history, from AOL to AT&T to Discovery, is filled with promised synergies and mounting debt. This deal brings roughly US$80 billion more. By choosing behavioural remedies, regulators accepted promises only as strong as their enforcement.
As the next few years unfold, one question remains: when a company borrows this heavily to grow, who ultimately pays?
