By Sarah Mitchell
The Appleton Times
Los Angeles -- Paramount Skydance announced on Tuesday a sweetened bid for Warner Bros. Discovery, introducing several enhancements to its hostile takeover offer without increasing the per-share price. The move comes amid intensifying competition in the media sector, where Paramount's all-cash proposal of $30 per share is positioned as superior to a pending deal between Warner Bros. Discovery and Netflix.
In December, Paramount launched its unsolicited tender offer for the entire company, aiming to acquire all outstanding shares of Warner Bros. Discovery at $30 each in cash. The latest revisions, detailed in a statement from the company, include a "ticking fee" designed to compensate shareholders for any delays in regulatory approval. This fee amounts to 25 cents per share for each quarter the deal remains unclosed after December 31, 2026, potentially totaling around $650 million in cash value per quarter of delay.
"The additional benefits of our superior $30 per share, all-cash offer clearly underscore our strong and unwavering commitment to delivering the full value WBD shareholders deserve for their investment," said Paramount CEO David Ellison in the announcement. He added, "We are making meaningful enhancements – backing this offer with billions of dollars, providing shareholders with certainty in value, a clear regulatory path, and protection against market volatility."
Paramount's updates also address potential financial hurdles for Warner Bros. Discovery. The company pledged to cover the $2.8 billion termination fee that Warner Bros. Discovery would owe Netflix if their agreement collapses. Additionally, Paramount committed to eliminating a $1.5 billion refinancing cost associated with Warner Bros. Discovery's debt, easing the path for the transaction.
The revised offer is described as fully financed, supported by $43.6 billion in equity commitments from the Ellison family and RedBird Capital Partners, alongside $54 billion in debt financing from major lenders including Bank of America, Citigroup, and private equity firm Apollo. This robust backing is intended to assure investors of the deal's viability in a landscape marked by economic uncertainty and shifting media alliances.
Warner Bros. Discovery's current entanglement with Netflix adds layers of complexity to the bidding war. Netflix's proposed acquisition, announced in December, targets Warner Bros. Discovery's streaming and studios assets, with an estimated closing timeline of 12 to 18 months from the announcement date. This deal hinges on the prior separation of Warner Bros. Discovery's linear television networks, including CNN, TBS, and Discovery Channel, slated for the third quarter of 2026.
Netflix recently amended its offer last month, shifting to an all-cash structure of $27.75 per share for the targeted assets, down from an initial combination of cash and stock valued at $72 billion in equity. While specifics on the asset valuation weren't detailed in the amendment, the change reflects ongoing negotiations in a volatile industry.
Paramount's enhancements lean heavily on antitrust concerns that have surfaced since Netflix's bid emerged. Lawmakers and industry insiders have raised questions about the regulatory implications of Netflix absorbing significant portions of Warner Bros. Discovery's content empire, potentially consolidating power in the streaming market. Paramount argues its full-company acquisition presents a clearer path to approval, citing the ticking fee as a demonstration of confidence in swift regulatory clearance.
On the other side, Netflix executives remain optimistic about their proposal's prospects. During the company's January earnings call with investors, Netflix co-CEO Ted Sarandos expressed assurance regarding regulatory hurdles. "I believed the deal would secure regulatory approval," Sarandos said, emphasizing that the transaction is "pro-consumer ... pro-innovation, pro-worker." He highlighted how the deal could preserve jobs amid widespread layoffs in the media sector, positioning it as a stabilizing force rather than a monopolistic threat.
The broader context of this corporate drama unfolds against a backdrop of consolidation in the entertainment industry. Warner Bros. Discovery, formed in 2022 from the merger of WarnerMedia and Discovery, has faced challenges including declining cable revenues and heavy debt loads from previous acquisitions. Its streaming service, Max, has struggled to keep pace with rivals like Netflix, which boasts over 260 million global subscribers.
Paramount, meanwhile, has been navigating its own transformations. The company, known for franchises like Mission: Impossible and Star Trek, recently merged with Skydance Media in a deal valued at $8 billion, bolstering its position in film and animation. Ellison, son of Oracle founder Larry Ellison, has steered Skydance toward aggressive expansion, including partnerships with major studios.
Financial analysts watching the situation note the high stakes involved. Warner Bros. Discovery's market capitalization has fluctuated amid the bidding interest, with shares trading around $25 to $28 in recent weeks, below Paramount's offer price. The ticking fee, while innovative, introduces uncertainty if approvals drag on, potentially eroding shareholder value over time.
Regulatory scrutiny is expected to intensify. The Federal Trade Commission and Department of Justice, which oversee mergers in the U.S., have historically been cautious about media deals that could reduce competition. Past blocks, such as the aborted Penguin Random House-Simon & Schuster merger in 2022, serve as reminders of the hurdles ahead. Paramount's financing commitments may help, but experts predict a review process lasting at least six to nine months.
For Warner Bros. Discovery CEO David Zaslav, the dual offers present a pivotal choice. The company has not publicly commented on Paramount's revisions as of Tuesday evening, but sources close to the matter indicate internal deliberations are underway. Netflix's deal, if completed, would reshape Warner Bros. Discovery into a more focused entity centered on news and factual programming, potentially spinning off assets like HBO Max's content library.
Looking ahead, the outcome could redefine the streaming wars. A Paramount acquisition would create a powerhouse combining Warner's vast IP library with Paramount's production capabilities, challenging Netflix's dominance. Conversely, the Netflix partnership might accelerate innovation in ad-supported streaming, where both companies have invested heavily. Shareholders, regulators, and industry watchers alike await clarity, with the ticking clock on approvals now literally incentivized by Paramount's fee structure.
As the media landscape evolves, this bidding battle underscores the relentless pursuit of scale in an era of cord-cutting and global competition. Warner Bros. Discovery's next moves will likely dictate not just its future, but the trajectory of Hollywood's biggest players.