Paramount remains undeterred, improving its hostile takeover plan and pledging to pay Warner a $2.8 billion breakup fee.

Paramount Skydance has improved its hostile takeover offer for Warner Bros Discovery, in an attempt to reverse the situation in its competition with Netflix.

On Tuesday, February 10th, Paramount stated that if Warner Bros terminates its existing agreement, Paramount will pay the $2.8 billion termination fee Warner Bros must pay to Netflix, and will guarantee refinancing of Warner Bros's debt, paying the related $1.5 billion fee if necessary.

Additionally, to show its confidence in quickly obtaining regulatory approval, Paramount promised to pay Warner Bros shareholders a "delay fee" of 25 cents per share per quarter if the transaction is not completed by December 31st.

Warner Bros said in a statement that it will review the revised offer and then make recommendations to shareholders. However, analysts noted that unless the basic acquisition price is increased, the enhanced terms are unlikely to attract Warner Bros's board.

After the announcement, Paramount rose about 0.5%, Warner Bros shares both gained about 2.3%, and Netflix climbed 1.45%.

Base Offer Unchanged, Core Issues Persist

Paramount did not increase its all-cash acquisition offer of $30 per share.

The company also did not respond to Warner Bros's concerns that, if the deal succeeds, the merged company would have a high leverage ratio.

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

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

Regulatory Approval Becomes Key Bargaining Chip

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

Showing regulatory advantages is one of Paramount's key strategies to block Netflix’s acquisition plan.

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

Paramount Pictures said the Ellison family and its partners have committed $43.6 billion in funding. The group plans to borrow another $54 billion from Bank of America, Citigroup, and Apollo Global Management.

Led by David Ellison, Paramount has been actively pursuing Warner Bros for months. When Warner Bros’s board agreed to sell its film studio and HBO Max streaming service to Netflix for $27.75 per share, totaling $82.7 billion, the film and TV company was quite surprised.

Warner Bros has repeatedly rejected Paramount’s proposals and stated that it will advance Netflix’s proposal for a shareholder vote before April.

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