The Ellisons’ (Oracle‘s Larry Ellison and his son David Ellison) hostile bid for Warner Bros. Discovery could ultimately blow up in their faces, as Paramount Skydance faces serious legal challenges (from multiple state AGs and various unions) to get its hands on the other MASSIVE media company, which controls entities like HBO Max, CNN, and the legacy Hollywood studio Warner Bros. Pictures. It doesn’t just end in public embarrassment; the total losses they could end up paying if the deal falls apart are steep: they’d have to pony up a hefty $9.8 billion only to walk away with nothing.
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That insane sticker shock number was already known, but it’s making the rounds again via Bloomberg, as a new piece reiterates that Paramount Skydance is required to pay WBD shareholders $7 billion for wasting their time. At the same time, they previously shelled out $2.8 billion to get Netflix out of the media acquisition (the streaming giant has telegraphed that if the deal fails, they’re not going to make a second attempt) back in February with “cash on hand.”
This reminder of the big bucks involved comes after a judge recently ordered the company to pause its $110 billion merger, as civil trials exploring the potential illegality of the deal could put the entire thing into a wood chipper if it’s exposed that it could violate certain federal/state laws and conflicts of interest (something the Trump administration has ignored completely).
We’re curious where that $10 billion is going to come from; Bloomberg says that “Larry Ellison and a family trust would reimburse Paramount.” But we likely can’t rule out them eventually sell off divisions at the newly bought Paramount assets to compensate for those losses (personnel could be the first to go, so folks might want to brace for mass layoffs), we could see those shareholders getting just as upset and potentially push for new leadership (although, we’re unsure if David Ellison is ever going to lose control even if this turns into a disaster).
Another element here are some hefty “ticking fees,” said to be in the range of $650 million per quarter:
“Starting on Oct. 1, Paramount will have to pay Warner Bros. shareholders ‘ticking’ fees of roughly $650 million a quarter. If Paramount is ultimately successful in acquiring the company, those late fees will be covered by the Ellisons and their partners as well. If the deal doesn’t close, Paramount doesn’t owe the ticking fees. Warner Bros. would receive the $7 billion break-up fee instead.”
There are plenty of “what-ifs?” going on here and while many believe this is the death-rattle for the Warner Bros. Discovery deal, many balked at the idea of the hostile bid in the begining, which ended up going through despite all the obvious conflicts of interest (President Trump has said in public he believes the Ellisons-controlled CNN would pivot to more friendly coverage to his authoritarian government, like what has happened with CBS News division). Stay tuned, because we likely could learn more about the future of the deal, perhaps even before October (when those “ticking fees” kick in).
