March 2 (Reuters) – Paramount said on Monday that a merger between Warner Bros. and Paramount Skydance would create a combined entity with about $79 billion in net debt, as it ruled out any plans to divest or spin off cable TV assets.
Paramount CEO David Ellison disclosed the news during a conference call with analysts after earlier Friday signing the $110 billion, or $31 per share, Warner Bros. deal after Netflix declined to increase its offer.
Ellison said the two companies would combine their streaming services into a single platform, giving Paramount the scale and firepower needed to compete more effectively in a market dominated by Netflix.
Ellison said the two companies together already serve more than 200 million direct-to-consumer subscribers in more than 100 territories.
“Unlike Netflix, Paramount’s business could use a shot in the arm and a direct push to achieve the greater scale it needs,” said Morningstar senior analyst Matthew Dolgin.
The merger also brings together Paramount’s CBS, MTV, Comedy Central and BET with Warner’s networks including CNN, HBO, TNT and Food Network.
The combined entity will have one of the industry’s deepest libraries of commercially proven intellectual property, united by the Game of Thrones, Mission: Impossible, Harry Potter, Top Gun, DC Universe and Spongebob franchises.
Protracted bidding competition
Competition between Warner Bros. studios and streaming properties has intensified for months, with Paramount and Netflix vying for acquisition offers against each other.
Netflix struck first, signing an agreement in early December to buy the assets (excluding cable networks) for $27.75 per share, or $82.7 billion.
Netflix declined to match Paramount’s proposal after Warner’s board deemed it superior, withdrawing from a high-stakes battle for properties including DC Comics, HBO and HBO Max.
The Paramount-Warner Bros. deal would also remove doubts surrounding the value and risk of a spinoff of cable networks that Warner shareholders would retain under Netflix’s proposal, reducing one of the key variables that has increased doubts about Netflix’s bid.
The combined entity is expected to produce at least 30 theatrical films per year, while retaining Warner Bros. and Paramount studios.
On Friday, Paramount paid Warner the $2.8 billion in termination fees it owed Netflix. The transaction is expected to close in the third quarter of this year.
Deal raises competition concerns
The deal is expected to easily win EU antitrust approval and the required divestment is likely to be minimal, Reuters reported on Friday, citing sources.