Shares of Paramount Skydance (PSKY) are up in afternoon trading on Tuesday after Warner Bros. Discovery (WBD) agreed to have discussions with the company and hash out terms for a possible merger between the two, following at least ten failed offers for the HBO parent.
PSKY surged nearly 10% to a session high of $11.33; the stock is currently up more than 6%. Paramount’s strong ties to the current Trump administration and Warner Bros.’ announcement to return to the table for negotiations are positively affecting the shares.
Over 7.17M shares have changed hands by 1:15 pm ET, closer to its three-month average trading volume of 8.77M.
Albeit Paramount’s latest amended offer was not enough for WBD CEO David Zaslav and was rejected, it caught his attention.
David Ellison’s latest offer notably included a “ticking fee” of $650M payable each quarter after 2026 to WBD shareholders if the regulatory approvals are delayed. Among other things, Ellison also agreed to fund the $2.8B termination fee to Netflix and backstop a debt exchange offer that would relieve Warner Bros. of $1.5B in financing costs.
Warner Bros., in a bid to provide maximum value to its shareholders, made use of the waiver in its current arrangement with Netflix to have discussions with Paramount and laid down an ultimatum of seven days for a “best and final offer.”
WBD has also clearly indicated that it wants more than $31 per share for the entire company and that Netflix retains the right to match Paramount’s offer.
If Paramount offers $33 per share, the PSKY-WBD deal is valued at nearly $116B, and at nearly $122B at $35 per share, inclusive of debt.
Warner agreeing to discussions with Paramount also comes amid the exit of Abigail Slater, the head of the antitrust division at the Justice Department, who determines the outcome of cases involving mergers and acquisitions.
Media reports suggested that Slater undermined pending cases due to differences of opinion and had disobeyed leadership.
Paramount shares are down nearly 30% so far this year, while Netflix is down 20%; WBD stock and the S&P 500 are down only marginally for the same period.