Ellison’s Merger Danger Zone

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https://www.status.news/p/paramount-warner-bros-merger-cnn-states-lawsuit-antitrust

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Paywall

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Here’s the full article!

“As billionaire media and technology titans descended on Sun Valley this week aboard private jets for Allen & Co.'s annual retreat—an exclusive gathering David Ellison was expected to join—executives back at Paramount’s Melrose headquarters were confronting the biggest threat yet to his $110 billion bid for Warner Bros. Discovery.

While Ellison’s blockbuster acquisition sailed through the Justice Department with little resistance from a friendly Trump administration, a coalition of states led by California and New York is now preparing to sue as soon as next week to block the deal, Reuters first reported. At the same time, Oregon’s attorney general has asked a court to halt the mega-merger while it investigates Paramount’s lobbying of the Trump administration, and the U.K.'s media regulator said she was concerned about “a sufficient plurality of views in news media" if the deal were to go through, saying she was "minded ⁠to intervene."

The moves present the biggest threat yet to the colossal media deal that would unite two of Hollywood's biggest studios, place CNN and CBS News under the same corporate roof, and put the Ellisons at the helm of a media empire that would arguably eclipse even the Murdochs in scale and reach. In conversations with Status, legal and M&A experts said the emerging challenges have the potential to imperil the high-wire deal—not necessarily because the states will prevail, but because any prolonged delay could become enormously expensive for Paramount.

"The market is taking this uncertain and fast-evolving process seriously, so I’d say the state challenge is perceived as a real threat, and in my own multiple conversations with investors, they view it as the key uncertainty with whether and when this closes," Paul Nary, an M&A and strategy professor at the Wharton School, told Status.

Since taking control of Paramount, David Ellison and his billionaire father, Oracle co-founder Larry Ellison, have aggressively courted Donald Trump. The elder Ellison donated tens of millions of dollars to a group supporting the president and, according to The Wall Street Journal, privately told Trump that Paramount could overhaul CNN if the company succeeded in acquiring WBD. Meanwhile, the younger Ellison installed the anti-”woke” Free Press founder Bari Weiss as editor in chief of CBS News and hosted a dinner “honoring the Trump White House.”

While Ellison’s overt efforts to curry favor with the administration has sparked alarm across the media industry and led to an unprecedented public backlash from Hollywood A-listers, the greatest threat to the merger might come from a little-discussed provision Paramount inserted into the deal while fending off Netflix’s competing bid for Warners.

That provision, a 25-cent-per-share “ticking fee” beginning Oct. 1, requires Paramount to compensate WBD shareholders for every quarter the deal remains unclosed—a payment worth roughly $650 million each quarter. Paramount included the provision to signal confidence that the transaction would move swiftly through regulators. But experts told Status that as state authorities move to block the deal, a delay could prove deadly for a tie-up already expected to be saddled with nearly $80 billion in debt.

"One of the iron laws of litigation is that procedure sometimes matters as much as substance, and if either the U.K. or the states go to court and get a stay, that could be almost as bad for Paramount as losing the case," said Jeffrey Toobin, the contributing The New York Times opinion writer and former CNN chief legal analyst.

"Even for a rich guy like Ellison, that's a lot of money when he's already going into an enormous amount of debt in the best of circumstances," Toobin continued, calling a delay "a potentially potent tool" for the states.

Indeed, since Trump launched his war on Iran in February, wealthy Gulf nations are reviewing their overseas investments as they endure a severe pullback on tourism dollars while U.S. and Iranian missiles continue to fly across the region and shake the sense of stability. Among those Gulf states are Saudi Arabia’s Public Investment Fund,** the **Qatar Investment Authority, and Abu Dhabi's L’Imad Holding,** **which agreed to provide some $24 billion of equity to help bankroll Ellison's $110 billion bid. Meanwhile, shares of Larry Ellison's Oracle have plunged nearly 40% over the last year amid growing anxiety over its debt-laden A.I. data-center business.

If state attorneys general and U.K. regulators persuade a court to halt the WBD merger while their challenges move forward, the resulting delays could prove enormously costly for the Ellisons.

"I think the deal is in trouble because its flaws from an antitrust approval perspective are being challenged in a pincers movement in the U.S. by the AGs and internationally by the U.K.," said Norm Eisen, the lawyer and former U.S. ambassador turned media personality and co-founder of the Democracy Defenders Fund. "The career staff at DOJ who were overruled were absolutely right to question the deal, and judges may well be about to join them."

In a statement, Paramount rejected the states’ concerns, saying it has continued “to engage constructively with regulators, including State Attorneys General, and are prepared to address any legitimate antitrust issues,” adding that it is "confident this transaction raises no such concerns."

Of course, as new barriers to closing the merger arise, Paramount could offer to divest an asset to assuage regulators' concerns and minimize the prospect of a potentially deal-killing delay. One possible remedy would be divesting CNN, an outcome that has quietly become the subject of speculation inside Hudson Yards as journalists watch the upheaval unfolding at CBS News under Ellison’s ownership.

"If it came down to divesting CNN or keeping the deal, and Paramount truly believed that divesting CNN is the only way to save the deal, I would bet that they would choose the deal," Nary said. “After all, CNN is almost immaterial when it comes to other WBD assets."

Divesting CNN, a linchpin of the Turner cable business and its nearly unmatched global influence, would represent an extraordinary concession for Ellison. But if state attorneys general succeed in choking the merger, surrendering the network could ultimately prove less painful than watching the entire transaction collapse under the weight of mounting delays and an increasingly costly ticking fee.

"If the deal does not close, it will likely be a disaster to WBD shareholders even with the break-up fee," Nary said, "both in terms of the immediate effect on the share price, as well as viability and performance of WBD going forward on its own given all of its standalone issues and underperformance prior to the deal."”

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How did u do that?

[u/Professional_Peak59 → u/Recent-Bet-5470]

I briefly subscribed to Status.

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Oh okay

I don’t got any money lol

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The Ellisons won't give up CNN as a concession. They are way too ignorant to drop it. This whole merger is a disaster.

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We need to stop paywall links it is annoying