Paramount is still not giving up, improving its hostile takeover proposal, and promising to pay Warner a breakup fee of $2.8 billion

Paramount Skydance has improved its hostile takeover bid for Warner Bros. Discovery in an attempt to turn the tide in the competition with Netflix.

On Tuesday, February 10, Paramount stated that if Warner Bros. terminates the agreed-upon deal, Paramount will pay the $2.8 billion termination fee that Warner Bros. must pay to Netflix and will guarantee the refinancing of Warner Bros.' debt, covering related costs of up to $1.5 billion if necessary.

Additionally, to demonstrate confidence in quickly obtaining regulatory approval, Paramount has committed to paying Warner Bros. shareholders a "delay fee" of $0.25 per share each quarter if the deal is not completed after December 31.

Warner Bros. stated in a statement that it will review the revised offer and subsequently make a recommendation to its shareholders. Analysts have indicated that unless the base acquisition price is increased, the enhanced terms are unlikely to attract the Warner Bros. board.

Following the announcement, Paramount's stock rose about 0.5%, Warner Bros.' stock increased by about 2.3%, and Netflix climbed 1.45%.

Base Offer Unchanged, Core Issues Remain

Paramount has not raised its all-cash acquisition offer of $30 per share.

The company also did not address Warner Bros.' concerns that the combined company's leverage would be very high if the deal succeeds.

According to analysts Geetha Ranganathan and Raveeno Douglas from Bloomberg Industry Research in a report on Tuesday, while the enhanced terms add about $1.79 per share to cover the termination fee and financing costs, these terms are unlikely to impress the Warner Bros. board. The report stated:

Unless the base offer is raised to at least $32 per share, we do not expect the Warner Bros. Discovery board to engage in negotiations.

Regulatory Approval Becomes Key Leverage

Paramount stated that it has cooperated with the U.S. Department of Justice's second request for information regarding its takeover bid, a milestone that will trigger a 10-day response period for regulators.

Demonstrating an advantage in regulatory matters is one of Paramount's key strategies to thwart Netflix's acquisition plans.

If Paramount can successfully navigate the waiting period, it can be seen as a signal of government approval and attempt to persuade Warner Bros. shareholders to vote against Netflix's acquisition.

Paramount Pictures stated that the Ellison family and its partners have committed to investing $43.6 billion. The group plans to borrow an additional $54 billion from Bank of America, Citigroup, and Apollo Global Management.

Led by David Ellison, Paramount has been actively pursuing Warner Bros. for months. The film and television company was quite surprised when the Warner Bros. board agreed to sell its film studio and HBO Max streaming service to Netflix for $27.75 per share, totaling $82.7 billion Warner Bros. has repeatedly rejected Paramount's proposals and stated that it will put the Netflix deal to a shareholder vote before April