Paramount closes $110 billion Warner deal carrying $80 billion in debt

The latest:

The $110 billion Paramount-Warner Bros. Discovery merger closes Tuesday, leaving the combined company with about $80 billion of debt and a new corporate name, Skydance. Barron’s reported that Paramount must integrate a far larger business while hitting $6 billion in annual cost synergies, at a time when the merged group’s biggest unit, TV networks, is shrinking.

Details:

• The assets: Barron’s reported the merged company will control two major film studios, Paramount and Warner; cable networks including CNN; the CBS broadcast network; and a large streaming business, making it one of the biggest owners of legacy television assets as that segment declines.
• The stock: Paramount shares rose 3% to $9.78 on Monday but are down 26% this year, far nearer their 52-week low under $8 than the $20 high. Warner Bros. closed at $30.95, just below the all-cash merger consideration of roughly $31.02 a share.
• The financing: To fund the $81 billion purchase of Warner Bros. stock, Paramount issued $52 billion of debt and is set to raise about $47 billion of equity at $12 a share, above the current market price, from a group led by the controlling Ellison family.
• The investors: Barron’s reported that participants in the equity raise are expected to include Middle Eastern sovereign wealth funds, possibly Saudi Arabia’s Public Investment Fund. The company has not named them. The raise is expected to expand the share count to 5 billion from about 1.1 billion.
• The debt market: Last week’s $52 billion financing, among the largest high-yield packages ever, has not traded well, with some issues down 3% to 4%. Second-lien secured debt due 2034 yields about 9.5%, while a 6.875% unsecured issue due 2036 yields over 10%.
• Wall Street view: Only 3 of 25 analysts rate Paramount a Buy or equivalent while 10 have Sell ratings, according to Bloomberg. Wolfe Research’s Peter Supino, who rates the stock Underperform, wrote Sunday that the company faces “an uphill climb,” citing leverage near seven times Ebitda and negative sales growth.
• The targets: Paramount aims to realize $6 billion of annual synergies off a base of roughly $12 billion in annual Ebitda, and to cut debt below four times Ebitda by 2028. Moody’s Ratings described the synergy target as among the largest ever announced.
• The sweetener: Holders of Paramount’s Class B stock receive one warrant per share, with issuance expected to close October 13. Barron’s reported the warrant carries a $12 strike price and a 10-year term, and could initially trade near $3.
• The alternatives: Netflix has fallen over 25% in 2026 to $67.30, near 20 times projected 2026 earnings; Deutsche Bank’s Bryan Kraft upgraded it to Buy with a $95 target. Disney is down about 9% to under $104, at 15 times projected earnings.
• The leadership: Oracle chairman Larry Ellison is the main financial backer, while his son David Ellison serves as chairman and co-CEO alongside newly appointed Ynon Kreiz. Supino listed leadership uncertainty among the risks weighing on the stock.

Background:

The merger advanced after Paramount reached an agreement with a group of state attorneys general who had challenged the transaction on antitrust grounds, Barron’s reported.

Between the lines:

Barron’s assessed that Paramount’s publicly traded senior debt, yielding over 10%, may offer better risk/reward than its equity, since bonds rank ahead of all shareholders including the Ellison family. Supino estimated Disney trades near 9 times forward Ebitda against Paramount’s 7 times, a gap that narrows to roughly 10 times once Paramount’s synergy assumptions are stripped out.

What’s next

The warrant issuance is expected to close October 13. Watch whether Paramount meets its 2028 target of cutting debt below four times Ebitda, and whether missed targets trigger further equity raises that dilute existing holders.