Megan E. Stamm

The media landscape is bracing for a seismic shift as Warner Bros. Discovery (WBD) finds itself at the center of a high-stakes tug-of-war between Netflix’s $82.7 billion strategic acquisition and Paramount Skydance (Paramount)’s $108.4 billion hostile takeover bid. With billions of dollars and iconic franchises like HBO and DC Studios on the line, the WBD board of directors has officially entered “Revlon-land,” a legal reality where their primary duty shifts from corporate stewardship to becoming aggressive auctioneers focused solely on maximizing shareholder value. Grab your popcorn: we’re breaking down the complex legal chess moves that determine who wins the battle to reform media platforms in the United States. Netflix vs. Paramount Offers In December 2025, Netflix reached a definitive agreement to acquire the WBD streaming and studios division, including HBO and HBO Max, in a deal valued at approximately $82.7 billion. The offer consists of a mix of cash and stock and prices WBD at roughly $27.75 per share. Under this arrangement, WBD would spin off certain networks — such as CNN, TNT and Discovery — into a separate entity called “Discovery Global.” Shortly after the Netflix deal was announced, Paramount (led by Chairman and CEO David Ellison) launched a hostile $108.4 billion all-cash tender offer to acquire the entirety of WBD. At $30 per share, the Paramount bid represents a significant premium over Netflix’s offer and includes the acquisition of WBD's debt and cable networks. WBD’s board of directors has voiced concerns to its shareholders about Paramount’s ability to finance this offer. To address the board's concerns regarding financial certainty, Oracle’s co-founder and David Ellison’s father, Larry Ellison, personally guaranteed $40.4 billion in equity to back the bid. The board has also considered that the Paramount offer does not guarantee coverage for the substantial $2.8 billion break-up fee that WBD would owe Netflix if the current deal is abandoned, as well as an estimated $1.5 billion in additional financing costs that WBD shareholders would bear if the Paramount deal were accepted. On January 7, WBD's board of directors unanimously recommended to its shareholders that the shareholders reject the latest $108.4 billion offer from Paramount, which includes the Larry Ellison personal guarantee as well as an increased breakup fee. The rejection of this competing bid again solidifies Netflix as WBD’s preferred acquirer, but is likely to continue to highlight whether the WBD board of directors’ fiduciary duties are being carried out properly when the Paramount offer is approximately $25 million more and an all-cash offer. Board’s Legal Requirement: Revlon Duties The stakes are high in this tug-of-war over WBD, both in terms of the billions on the table as well as the textbook case study in the Revlon doctrine’s application to the modern media mergers and how corporate boards must balance competing offers in this high-stakes environment where shareholder value, antitrust scrutiny and corporate strategy collide. Under the 1986 Delaware Supreme Court case Revlon v. MacAndrews & Forbes Holdings, 506 A.2d 173, 182 (Del. 1986), once a board decides to sell the company (or a controlling stake), its fiduciary duty shifts from “the preservation of [the company] as a corporate entity to the maximization of the company’s value at a sale for the stockholders’ benefit.” Given the two competing offers to purchase WBD, WBD has likely entered “Revlon-land,” a term that strikes a mix of excitement and anxiety in the heart of every M&A lawyer. Revlon fundamentally rewrote the rules for a company’s board of directors when evaluating the sale or break-up of a company. Normally, directors enjoy the protection of the “business judgment rule,” meaning courts will generally uphold a board’s decision when such decision can be attributed to some rational corporate purpose. The business judgment rule allows directors to focus on long-term strategy and corporate health and generally shields directors from second-guessing so long as a basic level of standard of care is met. Once a sale of the company becomes inevitable, or to a lesser extent is in “play,” the board’s role shifts dramatically. According to Revlon, the directors’ role is no longer “defenders of the corporate bastion” protecting the company’s independence. Instead, the board becomes an auctioneer, legally obligated to act with one singular purpose: securing the highest value reasonably attainable for the shareholders. This duty is not limited to just traditional mergers but also extends to asset sales that effectively terminate shareholders' ongoing investment, as clarified last January in In re Dura Medic Holdings Inc. Consolidated Litigation, 331 A.3d 796, 819 (Del. Ch. 2025). For media conglomerates like WBD, which holds valuable content libraries and streaming platforms, the Revlon doctrine's relevance is amplified. In the case of WBD, the board can no longer hide behind vague long-term strategic goals to justify a lower-priced deal. Every decision, from agreeing to deal protection fees with Netflix to rebuffing Paramount’s hostile advance, will be subject to enhanced scrutiny by the courts in which its sole duty is to maximize shareholder value. Further, Revlon ensures that when a corporate empire is being dismantled or sold, the directors cannot prioritize their own job security or preferred partners over shareholder returns. Critical Factors for Boards in Discharging Revlon Duties As the WBD board weighed Netflix’s friendly offer against Paramount’s hostile bid, it is safe to assume that any dispute over its decision-making is likely to be evaluated under Revlon’s enhanced scrutiny standard. When evaluating the competing bids, WBD’s board should have considered the following. Stay Adequately Informed A board’s duty to be informed requires it to fully consider alternative transactions. The board must fully investigate alternative offers and use independent financial advisers to show it has analyzed the true value of both bids. Neutrality Directors cannot favor one bidder over another for reasons unrelated to shareholder value (such as preserving their own board seats). If they provide Netflix with “deal protections” like the $5.8 billion breakup fee, they must prove that those protections were necessary to secure a superior bid and weren't just a “poison pill” to kill Paramount's offer. The board will need to consider a committee of disinterested directors to the extent there are any conflicts among certain directors on the board. The ‘Highest Value’ vs. ‘Highest Price’ Distinction Revlon does not strictly require the board to take the highest purchase price. The board can reject Paramount’s $108.4 billion cash offer in favor of Netflix’s lower bid if it believes the Paramount deal has a higher closing risk (e.g., deal certainty is low due to Paramount’s ability to satisfy financing and other conditions). Despite the Netflix offer having a higher value due to the long-term upside on its stock price, the board will need to weigh the heightened risk to deal certainty given the indications that the combination of Netflix and WBD will create market share in streaming services that will be heavily scrutinized and potentially blocked by antitrust regulators. Deal Structure Deal structure is a huge factor when analyzing competing bids. Paramount’s all-cash offer, assuming the reliability of the Larry Ellison guarantee, provides a clean exit for shareholders at a fixed price, shielded from market volatility. In contrast, Netflix’s mix of stock and cash offers potential valuation upside, allowing WBD shareholders to participate in the future growth of the combined streaming giant. However, this upside is a double-edged sword. If Netflix’s stock price spirals after the deal closes, the value of the deal declines, leaving minority shareholders with less than they bargained for. The bid structure also serves as a critical signaling mechanism to the market and the workforce. A cash-heavy bid like Paramount’s signals high confidence in the target's underlying value, suggesting the bidder believes it can extract enough value out of the target to justify the massive debt load. Yet, all-cash competing bids often raise red flags with regulatory agencies, creating a barrier to closing the deal. WBD’s Rationale for Rejecting Paramount’s Offer In analyzing and ultimately rejecting the hostile bid from Paramount, it is clear that WBD’s board did so through Revlon-colored glasses by applying the factors discussed above. “Paramount’s latest offer remains inferior to [WBD’s] merger agreement with Netflix across multiple key areas,” said Samuel Di Piazza, Jr., chair of the WBD board, in a release. The WBD board justified its rejection under Revlon by noting that “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for [WBD’s] shareholders if a transaction is not completed. [WBD’s] binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount’s offer would impose on [WBD’s] shareholders.” WBD’s board also highlighted that the Paramount offer carries a staggering $4.7 billion in costs, including a $2.8 billion termination fee to Netflix and penalties for failing to complete debt exchanges. These costs effectively reduce the net value to shareholders and lower the protective "break-up fee" Paramount would pay if the deal fails from $5.8 billion to a mere $1.1 billion. In contrast, the board continues to believe that a stable combination of cash and stock and no financial penalties in the Netflix offer provides significantly higher value to shareholders. Beyond the price tag, the board expressed grave concerns regarding the extraordinary financial risk and lack of certainty in Paramount’s ability to close the deal. WBD’s board claims the Paramount proposal is essentially structured as a leveraged buyout (LBO). In fact, they claim Paramount’s proposal is structured as the largest LBO in history, requiring Paramount to take on nearly $95 billion in debt. Paramount has a $14 billion market capitalization, and its offer requires nearly $95 billion of debt and equity financing, which is close to seven times its total market capitalization. The board’s position is that this debt structure makes the deal highly vulnerable to market shifts and lenders’ willingness or ability to provide funds at close. To further justify the concerns with Paramount’s financial health, WBD’s board noted Paramount currently has a “junk” credit rating and negative cash flow, which stands in stark contrast to Netflix’s $400 billion market cap, investment-grade balance sheet, and robust free cash flow. Finally, the board warned of the operational damage WBD would suffer during a potential 12-to-18-month closing period. Paramount’s offer imposes onerous restrictions that would prevent WBD from pursuing key strategic initiatives, such as the planned separation of Discovery Global. If the deal were to collapse after such a long period of restricted operations, the board believes shareholders would be left with a severely diminished business and insufficient compensation for the resulting value destruction. Stay Tuned The next step in this dramatic sale process is for WBD’s shareholders to vote on whether to reject Paramount’s offer. Then, it is to be seen whether Paramount comes back with a further amended offer to continue to apply pressure on the WBD board to further consider the point in which a Paramount offer may actually provide superior value to the Netflix transaction. As this process continues to unfold, it is likely to further test whether the Revlon framework designed to guide boards in an era of industrial conglomerates can adapt to the complexities of media consolidation in modern times, such that WBD’s justification for supporting the Netflix deal and rejecting the Paramount deal will survive the challenges that are likely to ensue from investor lawsuits. For investors, the Revlon doctrine remains a critical lens for evaluating board decisions in mega-media mergers. But as the WBD saga continues to demonstrate, there is a fine line between Revlon fiduciary duties and long-term strategic vision.