By Zachary Esquenazi
The latest Hollywood drama is unfolding not on screen, but in the boardroom. In late December 2025, Warner Bros. Discovery (“WBD”) became the target of competing acquisition efforts from streaming giant Netflix and its rival Paramount Skydance (“Paramount”).
On Friday, December 5, 2025, WBD agreed to pursue a transaction with Netflix that would transfer WBD’s studio and streaming division for $72 billion, valuing WBD at an effective $27.75 per share[1], and the company at $82.7 billion including debt.[2] The following Monday, December 8, 2025, Paramount launched a hostile all-cash bid worth $108.4 billion, or roughly $30 per share. On January 7, 2026, WBD’s board unanimously turned down Paramount’s offer.
In rejecting Paramount’s bid, WBD’s board emphasized concerns about financing and execution risk. The board characterized the offer as a “risky leveraged buyout that investors should reject,” citing its reliance on an “extraordinary amount of debt financing.”[3] The board and WBD investors also raised several additional reasons for rejecting the offer, including that the difference is insufficient to cover the $2.8 billion termination fee, and that Paramount would implement operating restrictions on the studio that would harm its business and competitive position.[4] By contrast, Netflix’s offer was viewed as providing clearer financing and fewer risks.
Although no shareholder litigation has currently been filed, the board’s decision would certainly fall into “Revlon land” and therefore be subject to enhanced scrutiny. The Delaware Supreme Court’s framework, established in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., holds that once the “break-up of the company [is] inevitable,” directors’ fiduciary duties shift towards maximizing the company’s value at a sale for the stockholder’s benefit.[5] The Revlon standard is functionally designed so that when a company is up for sale, its board must seek the best reasonably available value for its stockholders.[6] Therefore, if the board can provide that its decision-making process was reasonable and adequate, it will receive business judgment rule deference.[7]
If post-closing litigation were to arise, shareholders could allege that WBD’s board breached its Revlon duties by accepting Netflix’s lower-priced transaction while rejecting Paramount’s materially higher all-cash bid. The claim would likely focus on whether the board improperly discounted price in favor of deal certainty and risk aversion, rather than maximizing value once a sale became inevitable.[8] Plaintiffs would argue that the more than $2-per-share premium demanded greater weight than the board afforded it.
However, that claim would face significant hurdles. Revlon challenges often fail where boards can articulate specific, deal-related reasons why a higher bid may not truly deliver greater value to the stockholders.[9] Considering Paramount’s heavy reliance on debt financing, the proposed operational restrictions on the studio, and the $2.8 billion termination fee associated with abandoning Netflix, courts would likely find that these considerations eliminate Paramount’s price advantage.[10] Thus, as long as there isn’t evidence of an unreasonable process—such as WBD favoring Netflix just because they like them better—the existing factors would likely support a finding that the board’s decision-making process was reasonable and adequate, and that the business judgment rule would apply to its determination that Netflix’s lower-priced offer was the superior proposition.[11]
Zachary Esquenazi is a second-year law student from Sunny Isles Beach, Florida. He graduated from the University of Miami with a degree in business management and will be working at McDermott Will & Schulte in Miami this summer, where he plans to focus on mergers and acquisitions and private equity transactions.
[1] Dawn Chmielewski, Kritika Lamba & Dawn Kopecki, Warner Bros rejects revised Paramount bid, sticks with Netflix, REUTERS (Jan 7, 2026), https://www.reuters.com/legal/transactional/warner-bros-rejects-revised-paramount-bid-risky-leveraged-buyout-2026-01-07/.
[2] Id.
[3] Id.
[4] Id.
[5] Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986).
[6] See James D. Cox & Randall S. Thomas, Delaware’s Retreat: Exploring Developing Fissures and Tectonic Shifts in Delaware Corporate Law, 42 DEL. J. CORP. L. 323, 331 (2018).
[7] Katie Clemmons, Dissecting Revlon: Severing the Standard of Conduct from the Standard of Review in Post-Closing Litigation, 73 VAND. L. REV. 267, 279 (2020).
[8] See Revlon, 506 A.2d at 180-82.
[9] See In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 617-19 (Del. Ch. 2010).
[10] See Chmielewski et al., supra note 1.
[11] See Ann Lipton, Party Like It’s 1989, BUS. LAW PROF BLOG (Dec. 9, 2025), https://www.businesslawprofessors.com/2025/12/party-like-its-1989/.