Paramount CEO says Warner Bros. deal to buy $79 billion in net debt, sale of cable assets not planned

March 2 (Reuters) – Paramount Skydance CEO David Ellison said on Monday that his deal for Warner Bros. would leave the joint venture with about $79 billion in net debt and that there were no plans to divest or spin off its cable assets at this time.

Ellison made the comments after Paramount ended its $100 billion, or $31 per share, bid for Warner Bros. by signing a deal early Friday, after Netflix declined to raise its offer.

The combined entity will have the industry’s deepest libraries of commercially proven intellectual property, including franchises such as “Game of Thrones,” “Mission Impossible,” “Harry Potter,” “Top Gun,” DC Universe and “SpongeBob SquarePants.”

It will also boost Paramount’s streaming business by giving it the scale and power it needs to compete more effectively in a market dominated by Netflix.

“Unlike Netflix, Paramount’s business could use a shot in the arm and immediate growth to get the scale it needs,” said Matthew Dolgin, senior analyst at Morningstar.

The race for Warner Bros. studio and streaming assets has heated up over the months, with Paramount and Netflix bidding to take over the business.

Netflix struck first, signing a deal in early December to buy those assets, excluding cable networks, for $27.75 per share, or $82.7 billion.

Paramount has countered aggressively with hostile bids for the entire company, recently sweetening it to $31 per share, raising regulatory fees and offering to cover Warner’s break-even fee to Netflix.

After Warner’s board preferred Paramount’s offer, Netflix did not match the offer, backing out of a high-profile battle for assets including DC Comics, HBO and HBO Max.

A deal between Paramount and Warner Bros. would also remove uncertainty about the value of the cable network spin-off and the risk that Warner shareholders would have held under the Netflix offer, reducing one of the key variables that fueled doubts surrounding the Netflix bid.

The joint venture is expected to produce at least 30 theatrical films a year, while retaining both Warner Bros. and Paramount studios.

Paramount paid a $2.8 billion termination fee that Warner owed Netflix on Friday.

Paramount’s offering is fully funded, including $47 billion in equity from the Ellison family and Redbird Capital Partners, with an additional $54 billion in debt commitments from Bank of America, Citigroup and Apollo.

The deal is expected to close in the third quarter of this year.

DEAL SPARKS Concern about competition

Reuters reported on Friday, citing sources, that the deal is expected to easily win the European Union’s antitrust approval, with the investment required likely to be minimal.

Paramount, led by David Ellison, son of billionaire Larry Ellison, has deep ties to the Trump administration, a factor some analysts say could help it secure better regulatory treatment.

However, the deal was investigated by California State Attorney General Rob Bonta, who said the state was already investigating the deal and would be “vigorous” in the review.

Cinema operators have also warned that a merger of two of Hollywood’s biggest studios could cost jobs and reduce the number of films released in theaters.

Lawyers have also raised concerns that Warner Discovery’s acquisition could reduce consumer choice and lead to higher prices.

“The costs are clear: job cuts and a narrow slate may boost margins in the short term, but can hurt morale, slow decision-making, and limit creativity, undermining market competition,” said PP Forecaster analyst Paolo Pescatore.

Paramount has raised the termination fee it will pay if the deal fails to get regulatory approval from $5.8 billion to $7 billion.

(Reporting by Harshita Mary Varghese in Bangalore)