Paramount hikes Warner Bros breakup fee to US$5 billion

[LOS ANGELES] Paramount Skydance more than doubled the proposed breakup fee in its offer to acquire Warner Bros Discovery to US$5 billion, according to sources familiar with the company’s offer, part of a sweetened proposal designed to outshine rival bids.

The sum would be paid to Warner Bros if a deal is agreed to but not consummated. It’s a sign Paramount has confidence its proposed merger would pass muster with regulators, said the sources, who asked not to be identified because the terms have not been made public. Paramount had earlier proposed a US$2.1 billion breakup fee.

Warner Bros, the parent of HBO and CNN, is weighing offers from three media companies – Paramount, Netflix and Comcast – and could choose a winner in the next couple of weeks. The company received a second round of bids on Monday and has been in discussions with the interested parties since then.

Paramount, the parent of CBS, MTV and other media assets, triggered the auction of Warner Bros when it made several unsolicited offers for the company. Warner Bros began a formal process of seeking bids in October.

Paramount has now made five bids in total. It is seeking to acquire all of Warner Bros, while the Netflix and Comcast proposals anticipate a spinoff of Warner Bros’ cable networks. Paramount has argued the spinoff is a taxable event for Warner Bros, making its bid more attractive.

While all three bidders would invite regulatory scrutiny and have triggered worries about job losses in Hollywood, Paramount is the smallest of the three. Comcast is the largest in terms of sales while Netflix has the highest market capitalisation.

Paramount also boasts the closest relationship with the current US administration, which has taken an active role in media regulation. Since merging in August with Skydance Media, Paramount is controlled by the family of Oracle chairman Larry Ellison. His son David is Paramount’s chief executive officer. Larry Ellison has been a big supporter of US President Donald Trump and the president has praised both of the Ellisons in public comments.

David Ellison told guests at the Bloomberg Screentime conference in October that he had a “good relationship” with the Trump administration. The US Justice Department would have to approve any merger with Warner Bros

Republican Congressman Darrell Issa has raised antitrust concerns about a purchase of Warner Bros by Netflix, citing potential concentration in streaming. White House officials have also voiced concern about Netflix’s bid, the New York Post reported. Netflix’s leadership has been working to charm both the Warner Bros board and politicians.

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Paramount has yet to put forth a bid that has swayed Warner Bros’ leadership. The board has been seeking US$30 a share, valuing the company at almost US$75 billion, not including debt. While specific terms of the offers have not been made public, Netflix’s is higher than Paramount’s, according to several sources familiar with the discussions. BLOOMBERG