Paramount faces $79B debt post Warner Bros merger
What's the story
Paramount has announced that its net debt will rise to around $79 billion after the Warner Bros-Paramount Skydance merger. The announcement was made by Paramount CEO David Ellison during a conference call with analysts on Monday. The merger deal, worth $110 billion or $31 per share, was signed after Netflix refused to up its offer.
Merger benefits
Combined streaming services to create more competition for Netflix
The merger will see the two companies combine their streaming services into a single platform. This move is expected to give Paramount the scale and firepower it needs to compete more effectively in a Netflix-dominated market. Ellison said that together, the companies already have over 200 million direct-to-consumer subscribers across more than 100 markets.
Franchise consolidation
The merged entity will have one of largest IP libraries
The merger will also bring together Paramount's CBS, MTV, Comedy Central and BET with Warner's networks such as CNN, HBO, TNT and Food Network. The combined entity will have one of the industry's largest libraries of proven intellectual property. It will include popular franchises like Game of Thrones, Mission Impossible, Harry Potter, Top Gun, DC Universe and SpongeBob SquarePants.
Bidding war
Paramount's $110 billion deal beats Netflix's $82.7 billion offer
The battle for Warner Bros' studio and streaming assets has been going on for months, with Paramount and Netflix making competing takeover bids. Netflix was the first to strike a deal in December, agreeing to buy those assets (excluding cable networks) for $27.75 per share or $82.7 billion. However, after Warner's board found the Paramount proposal superior, Netflix chose not to match it and withdrew from the high-stakes asset battle including DC Comics, HBO and HBO Max.
Production plans
Deal will also produce at least 30 films a year
The Paramount-Warner Bros deal will also eliminate doubts over the value and risk of the cable networks spinoff that Warner shareholders would have retained under Netflix's proposal. The combined entity is expected to produce at least 30 theatrical films a year while retaining both Warner Bros and Paramount studios. Paramount paid the $2.8 billion termination fee owed by Warner to Netflix on Friday.
Regulatory concerns
Deal yet to receive final green light
The deal is likely to get EU antitrust approval without major divestments, Reuters reported on Friday. However, it has come under the scanner of California State Attorney General Rob Bonta, who said his office is already probing the deal and will be "vigorous" in its review. Cinema operators have also warned that merging two major Hollywood studios could lead to job losses and fewer films being released in theaters.