Paramount is offering a ‘ticking fee’ of 25 cents-per-share to Warner Bros shareholders from early 2027, which will amount to approximately $650 million in cash each quarter, until the WBD deal is finalised.
Paramount Skydance has promised to sweeten its Warner Bros Discovery (WBD) bid by enticing shareholders with extra cash for each quarter the deal fails to close after this year, and also offering to pay the breakup fee that WBD would have to pay to Netflix, if the streaming giant is compelled to walk away.
While Paramount has not raised its per-share offer, this fresh promise of extra cash is all part of its plan to appease WBD shareholders as it wages a long battle against Netflix for control over some of the biggest movies and television series of all time.
The mass media conglomerate is offering a ‘ticking fee’ of 25 cents-per-share to Warner Bros shareholders from early 2027, which will amount to approximately $650 million in cash each quarter, until the WBD deal is finalised. This move reflects Paramount’s confidence that a final merger deal will be reached relatively soon.
The CBS owner has offered WBD $108.4 billion, including debt, pricing each share at $30. While this figure remains unchanged, along with the ticking fee, Paramount is also promising to pay the $2.8 billion termination fee that Warner Bros would owe Netflix in case the deal falls through.
The battle to gain control over the Harry Potter and Game of Thrones franchise owner, which began last year, took an interesting turn last month, when Netflix made an all-cash bid for WBD’s assets. While the price Netflix is offering remains $82.7 billion or $27.75 a share, the all-cash offer was made in an effort to keep Paramount at bay.
As one of Hollywood’s biggest giants, with franchises like DC comics superheroes under its belt, Warner Bros is one of the most coveted studios, and neither Netflix nor Paramount are willing to back down without a tough fight.
WBD also faces internal pressures from stakeholders like activist investor Ancora Holdings, which has roughly a $200 million stake in the company, and plans to oppose the Netflix acquisition. However, according to LSEG data, WBD’s market capitalisation is $69 billion, making Ancora’s stake in the company less than 1%.
Some analysts believe that while these new sweeteners, like ticking and breakup fees, may not be enough to convince investors who are holding out for a bigger offer, it demonstrates Paramount’s belief that the Netflix combination would be easier to approve and would not pass regulatory scrutiny. At this point, it appears as though Paramount is simply adopting a trial-and-error method to see what might work best in its favour.
An improved contract is unlikely to shift WBD’s loyalties from Netflix to Paramount. Apart from raising its price, Paramount’s best chance of acquiring WBD is if outside regulators ban Netflix. Warner Bros. stated that its board would review the revised offer, but it has not changed its recommendation in favour of the Netflix acquisition. Shares of Warner Bros., Netflix, and Paramount were up 2%, 1.7%, and 1.3%, respectively.
In order to immediately address Warner Bros. board concerns regarding its proposal, Paramount additionally outlined a number of other actions. If the merger transaction with WBD does not go through, it stated that it will support Warner Bros.’ proposed debt exchange and completely settle the potential $1.5 billion charge owed to bondholders without lowering the separate $5.8 billion reverse termination fee payable to Netflix.
The company also said on Monday that it had already obtained foreign-investment clearance in Germany and certified compliance with the second request from the US Department of Justice, initiating a 10-day waiting period. It further stated that it is in discussions with the US, EU, and UK antitrust authorities.
Warner Bros has said that it will hold a special investor meeting in April to vote on the Netflix deal. It remains to be seen what the shareholder pulse suggests, and to what extent it could influence WBD’s decision on the merger.
