Paramount Softens Demands in Warner Takeover Bid

Paramount is adjusting its strategy as its takeover attempt of Warner Bros. Discovery continues. In a recent move, the company extended the deadline for its tender offer, hoping to secure more backing from shareholders.

On Tuesday, Paramount announced an added incentive for Warner shareholders—a “ticking fee” of 25 cents per share if the deal fails to finalize by the year’s end. This amounts to a potential total of $650 million. Additionally, Paramount reiterated its commitment to fund an agreement, even though Warner initially offered $2.8 billion in installments to Netflix under their merger arrangement.

Though the deal’s overall value remains the same, Paramount has proposed $30 per share in cash to Warner shareholders, with a deadline of March 2 for public stock offerings.

David Ellison, Paramount’s CEO, emphasized the new incentives in his statement, suggesting they reflect a strong commitment to enhancing shareholder value for Warner Bros. Discovery.

The deal seeks to acquire Warner for $77.9 billion, bringing its enterprise value, including debt, to about $108 billion. This buyout would encompass Warner’s networks such as CNN and Discovery, aside from its film and streaming operations.

However, gaining shareholder support seems increasingly challenging. Recent disclosures revealed that the backing has diminished over the past month, with only 42.3 million shares tendered as of Monday, sharply down from over 168.5 million in January.

Currently, Warner holds around 2.48 billion shares of Series A common stock, meaning Paramount would need at least 50% to gain control.

Netflix and Warner did not provide immediate comments on these latest developments.

This new March 2 deadline marks the third time Paramount has delayed its tender offer, and it could see further extensions. Paramount is also gearing up for a proxy fight and has been assembling a team to challenge the Warner-Netflix arrangement.

Warner management has expressed unwavering support for their agreement with Netflix, which includes a $72 billion deal to purchase Warner’s studio and streaming business, claimed to expedite a shareholder vote by April. This deal’s total enterprise value, including debt, is estimated at around $83 billion—or roughly $27.75 per share.

Both Netflix and Warner argue that their agreement is superior to Paramount’s offer, but Paramount counters that their bid offers greater value, noting the Netflix merger price could fluctuates based on Warner’s earlier announced network spinoff debt.

Interestingly, unlike Paramount, Netflix is not interested in acquiring Warner’s networks like CNN or Discovery. Instead, the merger agreement stipulates that Discovery Global will be an independent public company before their merger wraps up.

The possibility of Warner being sold to either company has sparked antitrust concerns from global lawmakers. The U.S. Department of Justice has launched reviews of both the Warner-Netflix agreement and Paramount’s hostile bid, citing ongoing discussions with all three parties about additional information requests.

While the companies maintain that their proposed deals would enhance consumer experience and enrich the entertainment sector, trade unions and other industry advocates warn that further consolidation might lead to job losses and reduced content diversity, among other adverse effects.