And now on to, what else, the deal of the year…

We’re approaching put-up-or-shut-up time in the battle for Warner Bros. Discovery, the months-long saga that, as things stand now, pits Netflix’s bid of $27.75 per share—in cash and stock, plus the stub equity value of the Discovery Global linear TV spinoff—and its signed merger agreement against Paramount Skydance’s hostile, $30-per-share, all-cash offer. In theory, the immediate next steps should be straightforward. But, as is often the case with these things, theory only gets you so far.

Way back on December 4, in their original tender offer document, the overlords at Paramount Skydance noted that the $30-a-share bid was not their “best and final” offer. C.E.O. David Ellison had famously texted WBD C.E.O. David Zaslav as much, too, and his banker, Blair Effron, also shared that news with one of his counterparties. So, what’s taking so long for PSKY’s best and final bid to arrive? Who knows, but if PSKY were to raise its bid for WBD to, say, $34 a share—injecting another $10 billion of Larry Ellison’s money into the deal—the WBD board would have no choice but to consider that new offer very seriously. In fact, I can guarantee you that the professional, well-advised WBD board would change its recommendation if PSKY made a superior bid in terms of price and certainty of closing—i.e., being assured of Trump’s blessing (as ridiculous as that is…).

At that point, the WBD board would go back to Ted Sarandos and Greg Peters, Netflix’s co-C.E.O.s, to see if the company would be willing to make its own all-cash bid, potentially larding up its pristine balance sheet with debt and plunging its credit rating into junk territory. If Peters and Sarandos passed, WBD would owe Netflix a $2.8 billion breakup fee, payable within three business days. Netflix would also be wise at that point to extract some kind of long-term content-supply agreement with PSKY-WBD.

In fact, the next steps in this deal have already been formally telegraphed. After PSKY decided to take its $30-a-share bid directly to shareholders via a hostile tender offer, WBD was required to file its response with the S.E.C. in the form of a 14D-9. In the filing, WBD laid out in chapter and verse what PSKY needed to do in order for the board to switch its recommendation. It is a fascinating roadmap, as I have previously reported. And PSKY could, and should, follow the 14D-9 if it wants to emerge victorious here.

Chief among the concerns laid out in the 14D-9 regarding PSKY’s December 4 bid was that WBD’s board did not believe Larry Ellison was personally guaranteeing the nearly $41 billion of equity that he, RedBird Capital, and the three Mideast sovereign wealth funds had pledged to invest. Then there were the restrictions on how the WBD management team could operate the company between signing and closing, particularly related to some balance sheet cleanups, and the question of whether PSKY would reimburse WBD for that potential $2.8 billion breakup owed to Netflix.

On December 22, PSKY revised its tender offer to address some of those concerns. For one, Larry agreed to personally guarantee $40.4 billion of the $40.7 billion in equity. (The remaining $300 million is coming from RedBird.) Larry also agreed to make his revocable trust, which supposedly holds his 1.16 billion Oracle shares, an irrevocable trust—meaning that even he cannot change the terms of it—not that he ever has, apparently, since it was formed nearly 40 years ago. In addition, PSKY agreed to match the $5.8 billion fee that Netflix had agreed to pay WBD if its deal was rejected by regulators.

The revised PSKY bid also claims to offer WBD improved “flexibility” in operating the business between signing and closing, including as it relates to “debt refinancing transactions.” This would presumably allow WBD to refinance its $15.4 billion bridge loan with JPMorgan Chase, thus avoiding an unacceptable “going concern” opinion from auditors, and exchange some of its junior lien debt by the end of 2026 to dodge a $1.5 billion penalty. “The assertion that Paramount required an ‘absolute consent right’ misrepresents the terms of both the Prior Proposal and Paramount’s December 4 Offer, as well as the December 22 Offer, and is clearly in tension with Paramount’s demonstrated commitment to working with Warner Bros. to resolve issues,” its lawyers noted in the revised tender offer document. (Disclosure: Through a previous transaction, Zaz is now a de minimis investor in Puck; RedBird is a minority shareholder.)

But despite PSKY’s claims of accommodating WBD’s wishes, the two sides still appear to be misaligned on several important deal points—and for the life of me, I can’t figure out why these remain outstanding issues. And the likelihood of the Ellisons pulling this off appears to come down to whether they can sort them out.

For instance, despite PSKY’s claims of giving WBD improved flexibility to operate its business between signing and closing, it’s not clear that the revised bid actually allows for that latitude—particularly when it comes to the two critical refinancings mentioned above. It still appears that neither can occur without some form of PSKY’s approval.

According to someone familiar with the WBD board’s deliberations, “PSKY has given some flexibility on operating covenants, but there are some significant onerous covenants that they are proposing. On the bridge [loan], they are still effectively asking for a consent right. They are saying we can refinance our bridge with debt that is callable at par, but that’s not practical to achieve in the debt markets, so it’s effectively a consent right.” This person continued: “On the junior debt exchange, they are prohibiting us from doing this, so it’s effectively a $1.5 billion cost, which they haven’t agreed to reimburse in the event that the transaction doesn’t close.”

The PSKY revised tender offer also contained an odd provision. For the offer to be effective, PSKY would have to enter into a merger agreement with WBD, the so-called “Merger Agreement Condition”—and that obviously hasn’t happened yet. That provision prompted the same person close to WBD to call the PSKY tender offer a “P.R. stunt” that “is not binding.” PSKY, this person added, is still “just playing games with our shareholders, as opposed to coming forward to us with a superior proposal that is binding.”

PSKY’s December 22 offer does not address the breakup fee reimbursement, either. As WBD noted in its 14D-9 filing, these two expenses—the $1.5 billion penalty for not exchanging the junior lien debt and the $2.8 billion breakup fee—amount to $1.66 per share. Without explicit agreements on these issues, the WBD board kind of has to deduct the $1.66 from PSKY’s bid, rendering it a bid of $28.34 per share.

In a Christmas Day missive, PSKY essentially tried to address some of these still-outstanding points. The company said it would expect that WBD could get an extension from JPMorgan Chase on paying down the $15.4 billion bridge loan. But if that were not to happen, PSKY said that its lenders—BofA, Citi, and Apollo—would pay off the bridge loan and extend its maturity “if needed.” The company also said it would work with WBD to avoid the $1.5 billion penalty if the WBD junior-lien debt is not refinanced. “Paramount has repeatedly assured WBD that it is prepared to provide WBD with cooperation to avoid these financing costs,” PSKY wrote. “We are confident that a liability management solution can be executed to satisfy the requirements WBD agreed with bond holders in June 2025, thus avoiding the $1.5bn payment.”

PSKY also claimed that the assertion that it would not pay the breakup fee to Netflix was “misleading.” According to the Christmas Day memo, “Any breakup fee payable to Netflix does not change the value of our offer to shareholders, which is $30 in cash. A breakup fee would only impact the assets and liabilities of WBD that Paramount would assume at closing.” (While that is true, without PSKY paying the breakup fee, WBD’s cash would be reduced by $2.8 billion.)

Since the two sides cannot speak to each other directly due to the Netflix merger agreement—any conversation could be deemed tortious interference—all WBD has to go on is PSKY’s filings. And I know that these two points have still not been resolved to the satisfaction of WBD, and therefore remain a problem for PSKY. In fact, I fear PSKY and the Ellisons are starting to annoy the WBD folks by not putting all their cards on the table once and for all.

That brings us to a minor update on perhaps the enduring sticking point in this enormous deal: the value of the Global Networks stub equity. Without WBD addressing the value it is placing on Global Networks directly in its filings, the Wall Street consensus seems to be that it will have a trading value of $3 per share, before any buyer’s premium is placed on it. The $3-a-share estimate comes from a recent report by Jessica Reif Ehrlich, the respected longtime media analyst at Merrill Lynch/Bank of America. (She revised that value down from $5 in September.)

Of course, as I have previously reported, other Wall Street analysts have placed higher—and lower—valuations on Global Networks. But according to Jessica’s estimate, the Netflix bid (including the value of the stub) totals $30.75 a share, which is obviously more than Paramount Skydance’s $30-a-share, all-cash bid. PSKY, no surprise, thinks that value for Global Networks is bunk. The company has previously valued that business at $1 a share, which would make its bid more valuable. But in its December 22 revised tender offer, PSKY showed a little flexibility in its thinking.

In the filing, PSKY valued Global Networks at $1.40 a share based on the market value of Versant, the linear TV spinoff from Comcast, which began trading publicly on December 15. Versant, which includes in its portfolio of assets CNBC, MSNOW, and the Golf Channel, closed last week at $47 a share—implying a market capitalization of $6.8 billion and an enterprise valuation of $9 billion, including its $2.25 billion of debt. Versant management has estimated its 2026 EBITDA at around $1.9 billion, implying an EBITDA multiple of 4.7x.

In its revised tender offer, the Ellisons argued that Global Networks should trade at a discount to the Versant multiple because it will have much more debt—$15 billion versus $2.25 billion (although that additional debt is accounted for in Jessica’s valuation)—plus significantly less exposure to live sports and a smaller digital portfolio. It arrived at the $1.40 a share for Global Networks by “generously applying,” it wrote, a multiple of 4.8x 2026 EBITDA.

I’m not sure I’m buying that Global Networks should trade at a discount to Versant’s EBITDA multiple, especially when Fox Corp. trades at between 7x and 8x and PSKY itself trades at around 10x. But unless and until PSKY raises its bid for WBD, the value of the Global Networks stub equity remains one of the key reasons why the WBD board has a signed merger agreement with Netflix.

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