Paramount sweetens offer for Warner Bros. shareholders in hostile takeover fight

Paramount Sweetens Hostile Bid for Warner Bros. Discovery with New Financial Incentives

Paramount has intensified its pursuit of Warner Bros. Discovery by enhancing its takeover offer with additional financial incentives, while extending the deadline for its tender offer as it works to secure more shareholder support.

The Skydance-owned company announced Tuesday it would provide Warner shareholders with a “ticking fee” if the deal isn’t completed by year-end. This bonus would amount to 25 cents per share—approximately $650 million total—for every quarter that passes after December 31. Additionally, Paramount committed to funding Warner’s proposed $2.8 billion breakup payment to Netflix, which would be required under Warner’s existing studio and streaming merger agreement with the streaming giant.

The core financial terms of Paramount’s offer remain unchanged at $30 per share in cash, with Warner stakeholders now having until March 2 to tender their shares, marking the third extension of this deadline.

“These additional benefits clearly underscore our strong and unwavering commitment to delivering the full value WBD shareholders deserve for their investment,” said Paramount CEO David Ellison in a statement.

Paramount’s ambitious bid values Warner Bros. Discovery at $77.9 billion, with a total enterprise value of $108 billion including debt. The acquisition would encompass not just Warner’s studio and streaming operations but also its network properties such as CNN and Discovery.

However, Paramount faces significant challenges in securing sufficient shareholder support. Recent company disclosures reveal a notable decline in tendered shares over the past month. As of Monday, Paramount reported that just over 42.3 million Warner shares had been “validly tendered and not withdrawn” from its bid, a substantial decrease from the more than 168.5 million Warner shares reported on January 21.

With approximately 2.48 billion shares of series A common stock outstanding, Paramount would need support from holders of more than 50% of shares to effectively gain control. The company has also begun soliciting proxies to challenge Warner’s agreement with Netflix, demonstrating its determination to pursue alternative avenues.

Warner Bros. Discovery acknowledged receipt of Paramount’s “amended, unsolicited tender offer” on Tuesday, stating that its board would review the proposal. However, the company emphasized that its leadership was not modifying its recommendation for the Netflix deal at this time.

Warner’s management has consistently supported its proposed merger with Netflix, which agreed in December to acquire Warner’s studio and streaming business for $72 billion. This deal, now structured as an all-cash transaction, has an enterprise value of approximately $83 billion, or $27.75 per share. The companies have indicated this structure will accelerate the timeline for a shareholder vote, potentially by April.

While Netflix and Warner maintain their agreement is superior, Paramount disputes this claim. On Tuesday, Paramount highlighted the “sliding scale” payout structure of the Netflix merger, which could range from $21.23 to $27.75 per share, depending on debt related to Warner’s previously announced spinoff of its networks business.

A key distinction between the competing offers is that Netflix has no interest in acquiring Warner’s networks. Under the Netflix-Warner agreement, “Discovery Global” would become a separate public company prior to the merger’s completion.

The potential acquisition of Warner by either company has triggered significant antitrust concerns among lawmakers globally. The U.S. Department of Justice has already begun reviewing both Warner’s agreement with Netflix and Paramount’s hostile bid, with all three companies disclosing that they’ve responded to DOJ requests for additional information.

International regulatory scrutiny is also anticipated. Paramount noted Tuesday that it had “secured clearance” for its tender offer from German authorities last month, representing an important step in addressing global regulatory requirements.

While the competing media giants argue their proposed deals would benefit consumers through expanded content offerings, unions and industry trade groups have voiced concerns that further consolidation could lead to job losses and reduced content diversity, particularly impacting the filmmaking sector.

As this high-stakes media industry battle continues, the ultimate outcome remains uncertain, with shareholders, regulators, and industry stakeholders all closely monitoring developments in this transformative potential merger.