$77.2 billion. That is what Morgan Stanley analysts estimate the combined Paramount and Warner Bros. Discovery will owe in net debt at the end of 2026, falling only to $75.1 billion in 2027. Interest alone would cost $6.37 billion next year, per their forecast.
Paramount Skydance chief David Ellison has won his long chase for Warner Bros. Discovery. Now comes the hard part, as Variety put it: making the economics work.
The deal, and the debt behind it
The transaction is valued at $110 billion, or $31 a share. It was signed after Netflix declined to raise its own offer. Paramount said in March that the merged company would carry about $79 billion in net debt, and ruled out selling or spinning off its cable assets. Warner Bros. Discovery ended last year with $29 billion of net debt; Paramount had $10.36 billion.
The financing includes $54 billion in debt commitments from Bank of America, Citigroup and Apollo: $39 billion of new debt and $15 billion to refinance Warner’s existing bridge facility. Andy Gordon, Paramount’s strategy chief, put expected cost savings at more than $6 billion, a good part of it from non-labor sources such as merging streaming technology and cloud providers. That beats the $3 billion synergy target Netflix had announced, and it has raised worries about layoffs and thinner spending on film and television.
Clearing the last hurdle
On Monday, September 21, Ellison wrote in a staff memo that the merger should close in about two weeks. The reason: Paramount had settled the antitrust case brought by 12 Democratic state attorneys general. The settlement forces no divestitures at the outset. Its “behavioral commitments” include at least 30 films a year from the combined studio, each with a 45-day theatrical window, which Ellison had already promised.
Morgan Stanley’s Sean Diffley and Daniel Duran called the outcome “a clear positive” in a September 22 note, given “the wide range of potential outcomes and fears in the marketplace.”
What investors get
The library is deep. It pairs Paramount’s CBS, MTV, Comedy Central and BET with Warner’s CNN, TNT and Food Network, and puts Game of Thrones, Mission: Impossible, Harry Potter, Top Gun, the DC Universe and SpongeBob SquarePants under one roof. Ellison called HBO a “crown jewel” that will keep the independence it needs.
He plans to fold HBO Max and Paramount+ into one streaming service. Timing and shape of that service have not been disclosed.
Sources
- Paramount–Warner Bros Discovery merger to create $79 billion net debt giant, no cable spinoff planned
- Merged Paramount-Warner Bros. Will Be a ‘Streaming Powerhouse,’ Wall Street Analysts Say — but Saddled With More Than $77 Billion in Debt
