Larry Ellison and his family could be liable for $9.8 billion if Paramount Skydance Corp's deal to acquire Warner Bros Discovery collapses, Bloomberg reported, citing company filings.
Ellison Family On the Hook For $9.8 Bn If Paramount-Warner Bros Deal Fails
Paramount paid Netflix $2.8 billion in February to get the streaming giant to drop its own pursuit of Warner Bros. While both fees have been reported before, the details of who ultimately bears the cost are buried deep in regulatory filings
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Paramount, led by Ellison's son David, has agreed to pay Warner Bros shareholders a $7 billion termination fee should the deal fall through over regulatory hurdles.
Separately, Paramount paid Netflix $2.8 billion in February to get the streaming giant to drop its own pursuit of Warner Bros. While both fees have been reported before, the details of who ultimately bears the cost are buried deep in regulatory filings.
Deal Delay Brings Fresh Scrutiny
The numbers have drawn renewed attention after Paramount agreed last week to push back the deal's closing to next June, or five days after courts rule on lawsuits filed by 12 states and the Writers Guild of America seeking to block the merger. Paramount, which already carries heavy debt, would not need fresh borrowings to cover the fees.
If the acquisition does not close, Larry Ellison and a family trust would reimburse Paramount for both the $7 billion termination fee and the $2.8 billion Netflix payout, adding up to $9.8 billion. Ellison has committed to this by agreeing to buy new Class B shares of Paramount at $16.02 apiece. The stock currently trades around $8 a share.
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How The Fees Are Structured
The $2.8 billion Netflix fee was funded in February through cash reserves and new borrowings, a public filing showed. That sum is expected to eventually be covered by $46.7 billion in fresh equity coming from the Ellisons and their partners, including RedBird Capital Partners and three Middle Eastern sovereign wealth funds, once the Warner Bros deal closes.
From October 1, Paramount must pay Warner Bros shareholders "ticking" fees of about $650 million every quarter until the deal closes. If the acquisition goes through, the Ellisons and their partners will absorb these fees too. If it does not, Paramount will owe no ticking fees, and Warner Bros will instead receive the $7 billion break-up fee.
Ellison's Backing And Wealth
Larry Ellison, who co-founded Oracle, backed David Ellison's takeover of Paramount last year and personally guaranteed the equity portion of the Warner Bros deal to help Paramount win it.
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Oracle shares, the main source of Ellison's wealth, have fallen this year on concerns about the company's data centre spending and the effect of artificial intelligence on its core software business. According to the Bloomberg Billionaires Index, his fortune has dropped 31% to $163 billion this year.
Paramount Skydance had already agreed to pause its $110 billion acquisition of Warner Bros Discovery until a federal judge rules on the states' legal challenge, court papers showed. The delay could cost Paramount roughly $7 million a day in fees owed to Warner Bros shareholders if the merger does not close by September 30.
Twelve states, led by California, sued on July 13, arguing the deal would "extinguish competition" in Hollywood and reduce choices for moviegoers and cable customers. Paramount has called the states' claims meritless and said it would "vigorously defend" the merger.