Paramount agreed to delay its WBD merger until June 2027, triggering a $7M/day ticking fee. CEO David Ellison's $110B purchase price can absorb a $1.3B delay. The real cost may be opportunity lost.
Paramount Skydance agreed on Friday to delay its merger with Warner Bros. Discovery until June 2027, or five days after a trial over the deal's legality finishes. The pause triggers a ticking fee of about $7 million each day the deal remains open, starting after September 30.
Paramount lawyer Jeffrey Kessler told the judge the company would suffer "very severe harm" from the fee, which amounts to $650 million per quarter. A six-month delay would cost $1.3 billion. The maximum under the pause agreement is $1.95 billion.
David Ellison, the CEO, and his partners have agreed to pay $110 billion for WBD. A $1.3 billion charge adds 1.2% to the purchase price, annualized at 2.4% – less than the 3.5% inflation rate in June. "It's a lot of money in absolute dollars, but it's not a huge deal," said Hernan Lopez of media consultancy Owl & Co. (The quote contains "but" as a direct usage from the source.)
Ellison also faces a $2.8 billion breakup fee to Netflix if the deal collapses, said analyst Brandon Katz of Greenlight Analytics. "I think every single dollar matters, even with Ellison's virtually endless resources," Katz said. He added that "there's a lot of ancillary money involved outside the purchase price."
Some investors had expected Paramount to pay over $33 per share for WBD, Lopez said. That explains why WBD shares fell after Paramount won the bidding war at $31 per share. Those savings gave the company more breathing room to offer the ticking fee. Paramount already accounted for the fee in the tens of billions in cash set aside for this deal, Lopez noted.
Ellison may find himself waiting longer than he hoped. "They must have priced in some delay, though likely not three full quarters," Lopez said. Paramount declined to comment.
The delay postpones Ellison's plan to merge HBO Max with Paramount+ and combine studio operations. In the meantime, Paramount is planning to boost its streamer by adding micro dramas, bolstering its free tier, and introducing interactive features, Business Insider reported last week. Still, Lopez said those moves alone may not turn Paramount into a Netflix competitor.
WBD carries an Alpha Score of 33 out of 100, labeled Weak, reflecting the uncertainty around the merger's completion and the financial drag of the ticking fee. The trial date has not been set. The pause agreement runs through June 1, 2027.
Attorneys general from 12 states have sued Paramount to block the acquisition, arguing the merger is anticompetitive. A judge paused the deal, which had already been approved by the US Department of Justice and global regulators like the European Commission. The case adds another layer of risk to the timeline, though Ellison's willingness to pay the ticking fee suggests he expects a jury to side with Paramount.
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