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March 2 : The Warner Bros-Paramount Skydance merger will create a combined entity that would have a net debt of about $79 billion, Paramount said on Monday, as it ruled out any plan to divest or spinoff the cable assets.
This was disclosed by Paramount CEO David Ellison in a call with analysts after signing the $110 billion, or $31-per-share, deal for Warner Bros early on Friday, after Netflix declined to raise its offer.
The two companies will fold their streaming services into a single platform, Ellison said, giving Paramount the scale and firepower needed to compete more effectively in a market dominated by Netflix.
Ellison said together the companies already serve more than 200 million direct-to-consumer subscribers in more than 100 regions.
"Unlike Netflix, Paramount's business could use a shot in the arm and an immediate boost to achieve the greater scale it needs," said Matthew Dolgin, senior analysts at Morningstar.
The merger will also unite Paramount's CBS, MTV, Comedy Central and BET with Warner's networks including CNN, HBO, TNT, and Food Network.
The merged entity will have one of the industry's deepest libraries of commercially proven intellectual property, uniting franchises such as "Game of Thrones", "Mission Impossible", "Harry Potter", "Top Gun", the DC Universe and "SpongeBob SquarePants".
THE LONG-DRAWN BIDDING CONTEST
The contest for Warner Bros' studio and streaming assets heated up over months, with Paramount and Netflix trading rival takeover bids.
Netflix struck first, signing a deal early in December to buy those assets, excluding cable networks, for $27.75 per share, or $82.7 billion.
After Warner's board deemed the Paramount proposal superior, Netflix declined to match the offer, stepping back from the high-stakes battle for assets, including DC Comics, HBO and HBO Max.
The Paramount-Warner Bros deal would also remove doubts surrounding the value and risk of the cable networks spinoff that Warner shareholders would have retained under the Netflix proposal, reducing one of the key variables that had added to doubts around Netflix's bid.
The combined entity is expected to produce at least 30 theatrical films a year, while maintaining both Warner Bros and Paramount studios.
Paramount paid the $2.8 billion termination fee that Warner owed Netflix on Friday. The deal is expected to close in the third quarter this year.
DEAL SPARKS CONCERN OVER COMPETITION
The deal is expected to easily win European Union antitrust approval, with any required divestments likely to be minor, Reuters reported on Friday, citing sources.
Paramount, led by David Ellison, son of billionaire Larry Ellison, has deep ties to the Trump administration, a factor some analysts said could help it secure more favorable regulatory treatment.
However, the deal has drawn scrutiny from California State Attorney General Rob Bonta who said the state is already investigating the deal and will be "vigorous" in its review.
Cinema operators have also warned that combining two major Hollywood studios could cost jobs and shrink the number of films released in theaters.
