Odds shift as Paramount gains ground in Warner Bros. takeover battle

Trader sentiment in the Warner Bros. Discovery takeover market flipped this week after Paramount re-entered negotiations, reshaping expectations about who could ultimately acquire the company and how soon.  

For most of the market’s run, traders favored Netflix. That changed Sunday, when Paramount’s implied odds jumped to 51%. Netflix dropped by two points, dipping below Paramount on the market to 38%.

A separate market on Paramount Skydance acquiring Warner Bros. also saw major movement. Traders now price a 55% chance of a Paramount deal announcement before December, reflecting confidence that talks will progress before Netflix can revive its bid.

Netflix’s bid for Warner Bros. Discovery’s streaming and studio assets was initially the favorite. Then on Tuesday, The New York Times reported that Warner Bros. would restart talks with Paramount after ending them in December. Paramount has until Feb. 23 to come up with a better final offer for its takeover bid.

Paramount has made two new offers that appear to address concerns raised by Warner Bros. Discovery’s board, such as whether the Netflix deal could pass “regulatory scrutiny”. Pentwater Capital Management also raised concerns about the Netflix deal, causing further uncertainty about Netflix’s ability to take over Warner Bros. Discovery.

Paramount initially offered $108 billion to acquire all of Warner Bros. Discovery, a broader proposal than Netflix’s $83 billion bid, which targeted only the company’s streaming and studio assets. When Warner Bros. Discovery’s board appeared open to Netflix’s partial-sale plan, Paramount Skydance chairman and CEO David Ellison escalated the fight by launching a hostile takeover effort, nominating directors at the company’s annual shareholder meeting in a move designed to block the Netflix deal.

Ellison first launched his new takeover plan in December with the backing of his family’s company RedBird Capital Partners and other wealth funds. That uncertainty may have spilled into adjacent markets, including contracts tied to Warner Bros. production delays. Traders now price a 36% chance that The Batman Part II will be delayed again.

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