HBO Max & Paramount+ to Merge Post-Deal
Following the anticipated Paramount-Warner Bros. Discovery deal, the two companies plan to merge HBO Max and Paramount+ into a single streaming platform. The move is a clear example of the consolidation strategy driving media M&A, aiming to create a more competitive service against rivals like Netflix and Disney+.
The $110 billion enterprise value for the Warner Bros. Discovery acquisition is structured as an all-cash deal at $31.00 per share. This valuation represents a multiple of 7.5 times the projected synergized adjusted EBITDA for 2026. The transaction is heavily financed, with Paramount issuing $47 billion in new Class B shares and securing $54 billion in debt commitments. This merger will create a media entity with a pro forma net debt of approximately $79 billion. To address this, the combined company is targeting over $6 billion in run-rate synergies within three years. These savings are expected to come from consolidating streaming technology, optimizing real estate, and improving marketing spend efficiencies, rather than from layoffs or content production cuts. The new entity projects a net debt-to-EBITDA ratio of 4.3x on a synergized basis, with a goal of achieving investment-grade credit metrics within three years. Prior to the deal, both companies were navigating challenging financial landscapes. For the full year 2025, Warner Bros. Discovery reported total revenues of $37.3 billion and ended the year with $29.0 billion of net debt. Paramount Global's full-year 2025 financials showed total revenue of $29.03 billion with an operating loss of $35 million. The company's balance sheet carried approximately $13.6 billion in gross debt. In the direct-to-consumer segment, at the close of 2025, HBO Max had 131.6 million global subscribers, adding 3.5 million in the fourth quarter. Paramount+ ended Q4 2025 with 78.9 million subscribers. For Paramount+, average revenue per user (ARPU) saw a 10% increase in the fourth quarter of 2025. However, WBD's streaming ARPU saw a 9% year-over-year decline in the same period, partly due to growth in lower ARPU international markets. The strategic imperative for this merger is scale. The combined entity's streaming services will have a subscriber base of over 200 million, creating a more formidable competitor to Netflix's 325 million subscribers. This larger scale is expected to lower per-subscriber content costs and provide greater leverage in a consolidating media industry. The deal is expected to close in the third quarter of 2026, pending regulatory and WBD shareholder approval. Should the closing be delayed beyond September 30, 2026, a "ticking fee" of $0.25 per share per quarter will be implemented. As part of the agreement, Paramount has already paid the $2.8 billion termination fee Netflix was owed from its prior bid for Warner Bros. Discovery.
