Paramount CEO David Ellison says he is “absolutely open” to settling an antitrust lawsuit against the company’s pending merger with Warner Bros. Discovery but is also glad to proceed to a trial.
Speaking for many during the company’s second-quarter earnings call, one Wall Street analyst asked what will happen if the pending $110 billion deal with Warner Bros. Discovery doesn’t close due to the suit. A group of 12 state attorneys general and the Writers Guild of America sued last month, and a federal judge just prior to the earnings call set a trial date in March. The case, which has moved forward after the judge showed initial support for the complaint, has put the merger on hold.
“We are absolutely open to finding a solution out of court but believe we will win at trial,” Ellison said.
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A separate question on the call concerned executives’ outlook for a lengthy delay in terms of Paramount’s finances. As a sweetener of one of its final bids during the months-long contest for WBD, Paramount promised to pay a “ticking fee” to WBD shareholders if the deal is not closed by September 30. The ticking fee is estimated to be about $650 million for each quarter the deal remains pending.
Regarding the core financing for the deal, “all that has been placed, there’s nothing at risk,” Ellison affirmed. “We’re confident we’ll close the transaction, and we’re working towards that as fast as we possibly can.”
CFO Dennis Cinelli elaborated on the financial impact of a delayed close. He said additional costs beyond the equity and bridge financing funding the deal itself would come from two areas: the ticking fee and a “modest” fee related to bridge financing agreements.
The “bridge commitment fee,” Cinelli said, would add up to about $190 million. The ticking fee, he noted, is “only payable when and if we close.” While it didn’t get a mention on the call, Paramount would owe a $7 billion breakup fee if the deal were to eventually unravel.
Asked about the company’s overall financial state given the bumps in the merger road, Cinelli said he didn’t see any cause of concern. “We feel good about where we stand in terms of liquidity and managing through” the merger situation.
Paramount asked analysts to limit questions about the WBD deal. After the initial ones at the top of the call, call moderator Kevin Creighton, Paramount EVP of corporate finance and investor relations, shifted to topics like streaming, film and TV production and technology, with execs’ remarks largely hewing to the company’s quarterly letter to shareholders.
