Paramount Skydance Corp has more than doubled the proposed breakup fee in its bid to acquire Warner Bros Discovery Inc to $5 billion, in a move aimed at outshining competing offers.
The US-based media company will pay the amount to Warner Bros if a deal is agreed but not consummated. A breakup fee is typically paid to compensate the disappointed party for costs and lost opportunities.
The considerable hike from the previous $2.1 billion breakup fee signals Paramount’s confidence that its proposed merger will clear regulatory scrutiny, Bloomberg reported.
Who are the other bidders in this race?
Warner Bros, the parent of the television channels HBO and CNN, is weighing offers from three big media companies :
— Paramount Skydance Corp.
According to Bloomberg, the winner is most likely to be chosen in the next couple of weeks. Warner Bros also received a second round of bids on Monday, 1 December and has been in talks with the interested parties since then.
How many bids have Paramount made so far?
Paramount, the parent company of CBS, MTV and several other media assets, triggered the auction of Warner Bros after making several unsolicited offers for the company. However, Warner Bros. began a formal process of seeking bids only in October this year.
So far in the race to acquire Warner Bros, Paramount has made a total of five bids. In contrast, proposals from Netflix and Comcast involve a spinoff of Warner Bros’ cable networks. Paramount has argued that such a spinoff would be a taxable event for Warner Bros, positioning its own bid as the more financially advantageous option.
Paramount has yet to propose an offer that will sway Warner Bros’ leadership. The board has been seeking $30 a share, valuing the company at almost $75 billion, excluding the debt.
While specific details of the offers are not yet publicly available, Netflix’s proposal is reportedly higher than that of Paramount’s, some people aware of the development told Bloomberg.
Will this acquisition trigger job losses in Hollywood?
While all three bidders are expected to face regulatory scrutiny and have raised concerns about job losses in Hollywood, Paramount remains the smallest of the three. Comcast is the largest in terms of sales while Netflix commands the highest market capitalization.
Paramount also has the closest relationship with the current US administration, which plays an active role in media regulation. Since merging with Skydance Media in August, Paramount is controlled by the family of Oracle Corp Chairman Larry Ellison, who is a big supporter of President Donald Trump.
Republican Congressman Darrell Issa has raised antitrust concerns over the purchase of Warner Bros by Netflix, warning it could further concentrate power in the streaming market. White House officials have also expressed unease about Netflix’s bid, the New York Post reported. Meanwhile, Netflix’s leadership has been actively working to charm both the Warner Bros board and politicians.