Warner Bros. Discovery (WBD.US) saw its second-busiest day ever in options trading on Monday after Paramount Skydance (PSKY.US) announced a hostile takeover bid at $30 per share in cash, valuing the company at $108.4 billion. However, traders showed little confidence in the long-term prospects, with most activity concentrated in short-term contracts.
Shareholders have until January 8 to decide whether to tender their shares unless the offer is extended. This comes just days after Netflix (NFLX.US) proposed acquiring Warner Bros. Discovery for $27.75 per share, or roughly $82.7 billion in total enterprise value, including its film and TV production divisions, HBO Max, and HBO. Netflix stated it would maintain Warner Bros.' existing operational structure, with the deal's total equity value estimated at $72 billion.
Paramount Skydance was the first to approach Warner Bros. Discovery, initially offering around $60 billion in October, only to be rejected by the board, which then initiated a formal sale process. Paramount later raised its bid from $20 to $23.50 per share, eventually proposing $24 per share (80% cash, 20% stock), but Warner Bros. deemed it a "significant undervaluation."
In its latest offer, Paramount argues its bid is superior to Netflix’s, citing an additional $18 billion in cash for shareholders. Unlike Netflix, which excludes Warner Bros.' TV networks (CNN, TNT Sports, Discovery Channel), Paramount seeks full acquisition.
Insiders suggest Warner Bros. internally values Netflix’s offer at $31–$32 per share, as shareholders would retain stakes in both post-split entities. The board favors Netflix’s bid due to concerns over the cable TV segment’s high leverage and uncertain fundamentals.
Options traders appear skeptical about the outcome. Data shows minimal activity in long-dated January 2027 $27 puts, while near-term contracts saw millions in volume. Monday’s options trading surged nearly 200% above the 20-day average, exceeding 2 million contracts—driven largely by retail investors, with few institutional block trades.
One notable institutional trade involved a call spread betting Warner Bros.' stock would stay between $24 and $28 by January 16. Shares closed up 4.4% at $27.23.
Regardless of the acquirer, antitrust hurdles loom. Former President Trump, Senator Elizabeth Warren, and the Writers Guild of America have raised concerns. Trump warned of Netflix’s potential market dominance, while Warren labeled Paramount’s move a "five-alarm antitrust fire."
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