Paramount updates bid for Warner Bros. Discovery, introduces ‘ticking fee’

Paramount is still trying to succeed in its hostile takeover bid for Warner Bros. Discovery.

This time around, the David Ellison-owned company has made some meaningful changes to its bid. Earlier this week, Paramount introduced a so-called “ticking fee” to its offer, pledging $0.25 per share to WBD shareholders for each quarter its deal does not close. That amounts to approximately $650 million per quarter.

The offer implies that Paramount is confident its path to regulatory approval is smoother than Netflix’s. Late last year, WBD announced its intention to accept Netflix’s offer to purchase its studio and streaming businesses. Paramount, on the other hand, wants to buy all of WBD, including its cable assets, and launched its takeover bid shortly after the Netflix deal was announced.

As another sweetener, Paramount has decided that, should its takeover bid succeed, it will cover WBD’s breakup fee with Netflix. As part of WBD’s original deal with Netflix, it would have to pay the streamer $2.8 billion if it accepted another offer before the deal closed. That’s no longer a concern for WBD, as Paramount would cover the fee.

Further, according to Todd Spangler of Variety, Paramount will eliminate $1.5 billion in potential financing costs for WBD associated with its debt exchange offer by “fully backstopping an exchange offer that relieves WBD of its contractual bondholder obligations.” Paramount will fully reimburse the fee without reducing the separate $5.8 billion reverse-termination fee should its deal be blocked by regulators.

In response to the updated proposal, the WBD board said it would review Paramount’s new offer. “Consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, will carefully review and consider Paramount Skydance’s offer in accordance with the terms of WBD’s agreement with Netflix, Inc,” the company said in a statement. It further advised shareholders not to tender their shares to Paramount until the review process is complete.

On Wednesday morning, the Wall Street Journal reported that there is at least some movement from institutional investors to begin pledging their shares to Paramount. Per the report, Ancora Holdings, which holds approximately $200 million worth of WBD stock, says it opposed the Netflix deal and would prefer taking Paramount’s offer for the entirety of the company. All told, $200 million is a relatively small stake when the total value of the two proposed deals approach $80 billion each. But it shows there’s at least some appetite for the Paramount offer from certain shareholders.

WBD is expected to convene a shareholders meeting in either late March or early April to vote on the Netflix deal.