March 2 (Reuters) – Paramount Skydance CEO David Ellison said on Monday its deal for Warner Bros will leave the combined company with about $79 billion in net debt and that there were no plans to divest or spin off any of the cable assets at this time.
Ellison made the comments after Paramount finalized the $100 billion, or $31-per-share, bid for Warner Bros by signing an agreement early on Friday, after Netflix declined to raise its offer.
The merged entity will have one of the industry’s deepest libraries of commercially proven intellectual property, uniting franchises such as “Game of Thrones”, “Mission Impossible”, “Harry Potter”, “Top Gun”, the DC Universe and “SpongeBob SquarePants”.
It would also bolster Paramount’s streaming business by giving it the scale and firepower needed to compete more effectively in a market dominated by Netflix.
“Unlike Netflix, Paramount’s business could use a shot in the arm and an immediate boost to achieve the greater scale it needs,” said Matthew Dolgin, senior analysts at Morningstar.
The contest for Warner Bros’ studio and streaming assets heated up over months, with Paramount and Netflix trading rival takeover bids.
Netflix struck first, signing a deal early in December to buy those assets, excluding cable networks, for $27.75 per share, or $82.7 billion.
Paramount countered aggressively with a hostile bid for the whole company, recently sweetening it to $31 per share, boosting regulatory fee and offering to cover Warner’s breakup fee to Netflix.
After Warner’s board deemed the Paramount proposal superior, Netflix declined to match the offer, stepping back from the high-stakes battle for assets, including DC Comics, HBO and HBO Max.
A deal between Paramount and Warner Bros would also remove the uncertainty surrounding the value and risk of the cable networks spinoff that Warner shareholders would have retained under the Netflix proposal, reducing one of the key variables that had added to doubts around Netflix’s bid.
The combined entity is expected to produce at least 30 theatrical films a year, while maintaining both Warner Bros and Paramount studios.
Paramount paid the $2.8 billion termination fee that Warner owed Netflix on Friday.
Paramount offer remains fully financed, including $47 billion in equity from the Ellison Family and RedBird Capital Partners, with additional debt commitments of $54 billion from Bank of America, Citigroup and Apollo.
The deal is expected to close in the third quarter this year.
