Warner Bros. Discovery shareholders voted on Thursday to allow Paramount Skydance to buy the company for $110 billion, and this is a very important step towards changing things in Hollywood. If regulators approve, owners of stock will get $31 in cash for each share. However, the United States and the European Union still need to review the merger, and that will decide when it can actually happen.
What the vote approved
A large majority of Warner Bros. Discovery shareholders have supported the merger according to the company. The total value of the deal is approximately $110 billion, or almost $111 billion when you include the debt, and Paramount won a bidding competition that lasted for months to get it, defeating Netflix.
When the merger is finished, people who have Warner Bros. Discovery stock will get $31 in cash for each share they own. The companies also say that if it doesn’t go through by September 30th, investors will receive a small amount of money each quarter until it does happen.
Key economic terms disclosed by the companies include:
– $31 in cash for each Warner Bros. share
– 25 cents per share each quarter after 30 Sept until closing
– $7 billion termination fee if regulators block the deal
– $2.8 billion breakup fee paid to Netflix on Warner’s behalf
– Expected closing in the third fiscal quarter
Regulatory hurdles and political scrutiny
The merger has to be checked by groups that prevent monopolies in the U.S. (including the Department of Justice) and the EU. Several states may also legally challenge the merger. Senator Elizabeth Warren has called it a disaster for competition and says state attorneys general are actively working to stop it.
California Attorney General Rob Bonta has stated that the state is looking into the merger. The goal of completing it by September 30th is questionable because of these reviews, though Paramount says they are hoping to finish the deal in the next few months.
Industry backlash and labour concerns
People working in the industry – actors, writers, directors, and others – are campaigning against the merger. Over 4,000 people, including Joaquin Phoenix, Glenn Close, and Bryan Cranston, have signed an open letter warning that the merger will cause job losses, make movies and shows more expensive to produce, and reduce the variety of programs available for viewers.
During a hearing in Congress, Senator Cory Booker explained the significance very clearly. He said that this isn’t just about a business deal, but about who is in charge of the news, entertainment, and the stories we tell, and how power over our culture is being combined.
Executive pay pushback
The owners of the companies also voted against the amount of money CEO David Zaslav would receive. ISS, a company that advises shareholders, recommended voting against his pay because of very large, quickly-given stock awards (worth over $500 million) and potential tax refunds (worth $335 million) that would be some of the biggest “golden parachute” payments ever seen. This vote about compensation doesn’t force the company to do anything.
What a combined company could mean
The deal would combine two of the last major, traditional movie studios in Hollywood and bring together the streaming services Paramount+ and HBO Max. It would also put CBS and CNN under the same ownership as a large collection of films and television shows. Those running the companies say that customers will get better and more complete selections of things to watch.
David Ellison, CEO of Paramount, says they will be releasing more films in theaters. They plan to make at least 30 movies a year after the merger, and all of them will be in cinemas for at least 45 days before they are available on streaming.
Paramount agreed to buy Warner Bros. Discovery in February after a bidding war that lasted several months, and in which Netflix lost out. On Thursday, Paramount stock went down about 4.6 percent (most of that decrease happened before the vote), and Warner Bros. Discovery stock remained at the same price.
What happens next depends on regulators. If they say the deal can’t happen, Paramount will have to pay $7 billion to end the agreement. And, if the merger doesn’t go through by September 30th, Warner Bros. Discovery shareholders will start receiving the quarterly “ticking fee” until it finally does.
