Paramount Debt to Hit $79 Billion After Warner Bros Discovery Merger, No Plan to Sell Cable Assets

Paramount has confirmed that its merger with Warner Bros Discovery will create a combined entity with net debt of approximately $79 billion, while ruling out any plans to divest or spin off the merged group's cable television assets.

The $110 billion deal, valued at $31 per share, was finalised early last Friday after Netflix declined to raise its offer for Warner Bros' studio and streaming assets. The acquisition is backed by $54 billion in debt commitments from Bank of America, Citigroup, and Apollo, including $39 billion in new debt and $15 billion to refinance Warner Bros' existing bridge facility. Warner Bros Discovery carried net debt of $29 billion at year-end, while Paramount's stood at $10.36 billion.

Speaking on an analyst call, Paramount CEO David Ellison outlined plans to fold the companies' streaming services, including Paramount+ and HBO Max, into a single platform. Together, they already serve more than 200 million direct-to-consumer subscribers across over 100 regions, providing the scale to better compete with market leader Netflix.

The merger is expected to generate more than $6 billion in cost savings, significantly higher than Netflix's promised $3 billion synergy target from its own aborted bid. Paramount strategy chief Andy Gordon noted that a large portion would come from "non-labour sources," including combining streaming technology stacks and cloud providers. The higher savings goal had sparked fears of layoffs and reduced TV and film production.

The combined entity will unite Paramount's CBS, MTV, Comedy Central, and BET with Warner's networks, including CNN, TNT, and the Food Network. "By combining our linear businesses, we will expect to boost cash flow, drive efficiencies and help manage market pressures," Ellison said. He emphasised that HBO, described as "a crown jewel," would retain the resources and independence to continue its creative work.

The merged company will possess one of the industry's deepest libraries of intellectual property, encompassing franchises such as Game of Thrones, Mission Impossible, Harry Potter, Top Gun, the DC Universe, and SpongeBob SquarePants. It is expected to produce at least 30 theatrical films annually while maintaining both Warner Bros and Paramount studios.

The deal follows a lengthy bidding contest. Netflix had signed an agreement in December to acquire Warner Bros' studio and streaming assets, excluding cable networks, for $27.75 per share, or $82.7 billion. After Paramount's proposal was deemed superior, Netflix withdrew. Paramount paid the $2.8 billion termination fee Warner owed Netflix on Friday.

The transaction is expected to close in the third quarter of this year and is likely to secure European Union antitrust approval with only minor required divestments, according to Reuters sources. Paramount's leadership, under David Ellison — son of billionaire Larry Ellison — has deep ties to the Trump administration, a factor some analysts believe could facilitate favourable regulatory treatment.

Paramount shares were down approximately 1.6% in early trading.

Market Sentiment: 

The sentiment is cautiously optimistic but tempered by the staggering debt load. The strategic logic is sound: combining streaming platforms to achieve scale against Netflix, consolidating linear networks to manage cord-cutting pressures, and extracting over $6 billion in synergies. The combined content library is unmatched, providing decades of franchise value. However, $79 billion in net debt is a monumental burden that will consume significant cash flow and limit strategic flexibility. The decision to retain all cable assets, rather than spin off declining linear networks, adds execution risk as traditional TV continues to shrink. The higher synergy target than Netflix's bid suggests either greater confidence or greater desperation — the market will watch delivery closely. Regulatory approval appears manageable, and political connections may smooth the path. For investors, this is a bet on streaming scale and content monetisation outweighing debt service costs. The 1.6% share dip reflects scepticism that the math works, but if synergies materialise and streaming losses narrow, the long-term upside could be substantial. For now, it's a high-stakes gamble in an industry where debt has crushed many before.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.