Key facts
- Paramount added a "ticking fee" to its bid for Warner Bros. Discovery, potentially costing $650 million per quarter if the deal extends past 2027.
- Paramount will cover Warner Bros.' $2.8 billion break fee owed to Netflix if the Warner-Netflix deal is terminated.
- The U.S. Justice Department and FTC will review the Paramount-Warner Bros. combination for antitrust concerns.
- Paramount's offer is intended to pressure Warner Bros.' board into negotiations and delay a shareholder vote.
- Larry Ellison has committed to personally guarantee $43 billion in financing for the Paramount-Warner Bros. deal.
Paramount has made a strategic move in its pursuit of Warner Bros. Discovery by introducing a "ticking fee" and agreeing to cover Warner Bros.' break fee to Netflix, rather than immediately increasing its bid. This maneuver aims to pressure Warner Bros.' board into negotiations and potentially delay a shareholder vote on the Netflix deal.
The ticking fee, set at 25 cents per share for every quarter the transaction doesn't close starting in 2027, could amount to approximately $650 million per quarter. This strategy allows Paramount to signal its willingness to increase the price if necessary, while also mitigating its risk if regulatory approval proves elusive. Paramount's commitment to covering the $2.8 billion fee Warner Bros. would owe Netflix if it withdraws from their agreement addresses a key concern for Warner Bros.' board.
Warner Bros. Discovery has hired trial lawyer Dan Petrocelli, who previously helped AT&T acquire Time Warner, to navigate the antitrust review process. However, the U.S. Justice Department and the Federal Trade Commission will scrutinize the proposed combination for potential anti-competitive effects, which could lead to demands for divestitures or an outright block. Furthermore, regulators in individual states and other countries may also pose significant obstacles.
Larry Ellison, a key backer of Paramount's bid, has pledged to personally guarantee $43 billion of the deal's financing. Despite these assurances and Paramount's efforts to appease Warner Bros.' concerns, regulatory approval remains a significant hurdle, with state attorneys general, such as Tennessee's, already voicing reservations about the potential consolidation in the media landscape.