The Paramount logo is shown on a water tower at the Paramount studio lot in Los Angeles, Calif.Mike Blake/Reuters
Paramount Skydance PSKY-Q has enhanced its Warner Bros. Discovery WBD-Q bid by offering extra cash for each quarter the deal fails to close after this year and agreed to cover the breakup fee the HBO owner would owe Netflix NFLX-Q if it walked away.
Even though Paramount did not raise its per-share offer, the sweeteners mark the company’s latest attempt to woo Warner Bros. shareholders in its prolonged battle with Netflix for control of some of the world’s most prized TV and film assets.
The CBS parent has offered a 25-cent per share “ticking fee” that will equal to about US$650-million in cash each quarter between the start of 2027 and the close of a deal with Warner Bros, Paramount said in on Tuesday.
It did not raise its overall offer of US$30 per share, or US$108.4-billion including debt, for the whole of Warner Bros. including cable assets.
But Paramount would fund the US$2.8-billion termination fee that Warner Bros. would owe Netflix if their US$82.7-billion deal for its studio and streaming assets falls through.
Both Netflix and Paramount covet Warner Bros. for its leading film and television studios, extensive content library and major franchises such as Game of Thrones, Harry Potter and DC Comics’ superheroes Batman and Superman.
Several analysts said the move signalled Paramount’s confidence that the Netflix deal may fail to pass regulatory scrutiny and it would have an easier path to approval, but it may not be enough to sway investors waiting for a higher offer.
“The sweetened deal is unlikely to sway WBD away from Netflix and toward Paramount. Paramount is throwing spaghetti at the wall and hoping something sticks,” said Ross Benes, senior analyst at eMarketer.
“Outside of raising its price, Paramount’s best chance at stealing WBD is from outside regulators blocking Netflix.”
Warner Bros. Discovery and Netflix did not immediately respond to requests for comment. Warner Bros shares were 2 per cent higher, while Netflix gained 3 per cent and Paramount was up 1.5 per cent.
‘Meaningful enhancements’
Paramount also unveiled several other measures aimed directly at addressing criticisms about its offer from the Warner Bros. board.
It would backstop Warner Bros.’ planned debt exchange, eliminating the risk of a potential US$1.5-billion fee owed to bondholders and would grant WBD the same interim operating flexibility it negotiated with Netflix.
The company also said it certified compliance with the U.S. Department of Justice’s second request on Monday, triggering a 10-day waiting period and has already secured foreign-investment clearance in Germany. It added it is in talks with antitrust regulators in the U.S., the European Union and the U.K.
“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 CEO David Ellison said in a statement.
Paramount also raised the personal guarantee from Oracle co-founder Larry Ellison to US$43.3-billion and expects to fund the deal with US$54-billion of debt from Bank of America, Citigroup and Apollo.
Uncertainty around Discovery Global
Paramount said it is open to discussing “contractual solutions” with Warner Bros.’ board to address the possibility that Discovery Global’s financial performance could continue to deteriorate beyond what it is projecting for its linear network business.
The company argued that Netflix’s offer leaves Warner Bros shareholders exposed to significant uncertainty as the amount of cash they would receive depends entirely on Discovery Global’s financial condition at the time of the spinoff.
Paramount estimated that if Discovery Global were spun off with leverage similar to Comcast spinning off most of its NBCUniveral cable networks to Versant, Netflix’s cash consideration for the deal would fall to US$23.20 per share.
The David Ellison-led company extended the deadline for its tender offer to Feb. 20, giving it more time to convince investors that its proposal for the Hollywood studio was superior to a rival bid from Netflix. However, Warner Bros. has repeatedly spurned Paramount’s offer.
The U.S. Department of Justice is reportedly examining whether Netflix engaged in anti-competitive practices for the deal.
For Netflix, gaining access to Warner Bros’ marquee assets – from Friends to Batman – could give it the cultural firepower to develop a new wave of streaming-first spinoffs, prequels and sequels.
It would also make Netflix the biggest global streaming player, with roughly half a billion subscribers.
Warner Bros. will hold a special investor meeting to vote on the Netflix deal, with the streaming pioneer saying that the meeting was expected to be held by April.
Netflix had last month switched to an all-cash offer for Warner Bros without increasing its US$82.7-billion price.
Warner Bros. board has said the Netflix merger deal is superior to Paramount’s bid because its investors would retain a stake in the separately traded Discovery Global.