David Ellison isn’t walking away.
Paramount Skydance (PSKY) has enhanced its bid for Warner Bros. Discovery (WBD), attempting to disrupt Netflix’s rival $82.7 billion offer. While the headline price remains unchanged ($30/share or $108.4B total), Paramount is now offering significant “risk insurance” to sway shareholders worried about regulatory hurdles.
🍬 THE SWEETENERS:
- Ticking Fee: Paramount will pay shareholders an extra $0.25 per share (~$650 million) in cash for every quarter the deal is delayed starting in 2027.
- Breakup Protection: Paramount agreed to fund the $2.8 billion termination fee WBD would owe Netflix if it walks away.
- Debt Backstop: A promise to reimburse a potential $1.5 billion fee to bondholders if the merger fails.
⚔️ THE STRATEGIC ARGUMENT: Paramount’s pitch is simple: Netflix’s deal is risky; ours is certain.
- Regulatory Risk: Paramount argues the Netflix deal faces severe antitrust scrutiny (DOJ is already investigating).
- Value Certainty: Paramount claims Netflix’s spin-off plan for “Discovery Global” (CNN/TNT) exposes WBD shareholders to declining linear TV assets, potentially dropping the real value of Netflix’s bid to $23.20/share.
💰 THE FINANCING:
- Larry Ellison’s Guarantee: Raised to $43.3 billion.
- Debt Stack: $54 billion committed by Bank of America, Citi, and Apollo.
💡 ANALYST TAKEAWAY: Paramount is betting that “Regulatory Certainty” is now worth more than a higher price tag. By offering to pay the Netflix breakup fee and a ticking fee for delays, they are trying to de-risk the decision for the WBD board. However, analysts remain skeptical: “Paramount is throwing spaghetti at the wall,” says Ross Benes (Emarketer), noting that without a higher headline price, it may not be enough to break the Netflix agreement.
👇 Media Investors: Is the regulatory risk of a Netflix/WBD mega-merger high enough to justify taking Paramount’s lower (but safer) offer?