Paramount has enhanced its offer for Warner Bros. Discovery, not formally upping its $30-a-share cash bid, but injecting a new $0.25 per share so-called “ticking fee” payable to WBD shareholders for each quarter its transaction has not closed beyond December 31, 2026.
It said the move comes to about $650 million in cash value each quarter and underscores “Paramount’s confidence in the speed and certainty of regulatory approval for its transaction.” It also agreed to fund a $2.8 billion termination fee that would be payable to Netflix and ticked off a series of concessions around WBD’s debt financing costs and obligations.
Warner Bros. Discovery has a deal to sell its studios and streaming assets to Netflix and advised shareholders several times to reject a hostile takeover offer from David Ellison‘s company, which is looking to acquire all of WBD. There’s a full-out PR battle raging as executives of all three court content creators, unions, Warner shareholders, politicians and regulators on both sides of the Atlantic. The giant streamer late last month upgraded its offer of $27.75 a share from cash-and-stock to all cash.
WBD has yet to set a date for a special meeting in April where shareholders will vote on the Netflix transaction. It’s been urging them to cast a yes vote. Paramount is aggressively lobbying them to vote no and, meanwhile, to tender their WBD shares to Paramount. The Ellisons have said they are planning to run an alternate slate of directors for election at WBD’s annual meeting, which comes later.
Both deals are expected to have long lead times to close. Netflix is not buying the cable assets and its agreement would see WBD spin off linear television into a separate public company called Discovery Global.
Paramount is ramping up the pressure with its announcement today. The $2.8 billion termination fee that would be due to Netflix if WBD switches sides has, for instance, has been an objection raised by the Warner board.
Paramount’s other new commitments include eliminating WBD’s potential $1.5 billion financing cost by fully backstopping an exchange offer that relieves WBD of its contractual bondholder obligations. Par said it will fully reimburse WBD’s shareholders for the $1.5 billion fee without reducing a separate $5.8 billion termination fee. That’s the amount Paramount (and Netflix) have agreed to pay WBD if an acquisition fails to close.
Also, if WBD’s financing sources will not extend the maturity of WBD’s existing $15 billion bridge loan, Paramount said its own debt financing sources “are fully prepared to do so, with any incremental costs covered by Paramount. Alternatively, Paramount will permit WBD to structure permanent financing in any way it chooses so long as the debt is redeemable at a commercially reasonable cost.”
Paramount said it will provide WBD flexibility between signing and closing, including by matching any comparable Netflix interim operating covenants. It said it “is open to discussing with the WBD Board of Directors contractual solutions to account for the possibility of continuing deteriorating financial performance beyond what WBD is currently projecting for its linear network business.”
Paramount’s amended offer is now fully financed by an increased $43.6 billion of equity commitments from the Ellison Family and RedBird Capital Partners and $54 billion of debt commitments from Bank of America, Citigroup and Apollo.
Financing includes “an irrevocable personal guarantee” from Oracle co-founder Larry Ellison of $43.3 billion covering the equity financing as well any damages claims against Paramount.
“While we have tried to be as constructive as possible in formulating these solutions, several of these items would benefit from collaborative discussion to finalize. If granted a short window of engagement, we will work with you to refine these solutions to ensure they address any and all of your concerns,” David Ellison wrote in a letter to the WBD board released publicly and in an SEC filing today.
Paramount claims the WBD board has consistently refused to engage with it over the course of multiple offers, which Warner has denied.
More to come
