Paramount (PSKY.US)'s acquisition of Warner (WBD.US) faces regulatory sniper! The deal broke out or caused the Oracle founder's family to pay huge compensation of 9.8 billion US dollars out of their own pocket

The Zhitong Finance App learned that if Paramount Tianmu (PSKY.US)'s transaction to acquire Warner Bros. Exploration (WBD.US) ultimately fails, Larry Ellison and his family will face $9.8 billion in compensation. Paramount Tianmu, led by Larry Ellison's son David Ellison, previously agreed that if the deal to acquire Warner Bros. Exploration fails due to regulatory issues, the latter's shareholders will be paid $7 billion to terminate the transaction. In February of this year, Paramount Sky Dance also paid $2.8 billion to Netflix (NFLX.US) to push the streaming company to abandon its bid for Warner Bros. Explore.

Although these expenses have been reported before, the details of who is responsible and how they are paid are hidden deep in the company's documents. With Paramount Tianwu last week agreeing to delay completion of the deal until next June, or to the fifth day after lawsuits blocking the proposed merger deal are resolved, these potential costs are once again in the spotlight. Currently, 12 US states and the Writers Guild of America have filed lawsuits in an attempt to prevent this merger deal.

Expensive transaction break-up fees

Notably, although Paramount is currently heavily indebted, there is no need to make additional loans to pay for these expenses. If the deal to acquire Warner Bros. Exploration is not completed, Larry Ellison and a family trust fund will reimburse Paramount Tianbu for $7 billion in transaction termination fees and $2.8 billion in fees paid to Netflix. Ellison agreed to provide the company with a total capital of 9.8 billion US dollars by purchasing newly issued Class B shares of Paramount Tianwu, at a purchase price of $16.02 per share. Currently, Paramount Tianwu's stock price is about 8 US dollars per share.

Ellison is the co-founder of software giant ORCL.US (ORCL.US) and supported his son David to complete the acquisition of Paramount Sky Dance last year. He also agreed to personally guarantee the equity financing portion of the Warner Bros. Exploration deal to help Paramount Tianwu win the deal. However, Oracle stock, which is the main source of its wealth, has been impacted this year due to market concerns about the company's spending in the data center sector and the impact of artificial intelligence on its traditional software business. According to reports, Ellison's wealth shrunk 31% this year to 163 billion US dollars.

According to public documents, Paramount Tianwu paid $2.8 billion to Netflix in February of this year using cash reserves and additional loans. If Paramount Tianwu finally completes the acquisition of Warner Bros. Exploration, the capital will ultimately be borne by the Ellison family and its partners — partners including Red Bird Capital and three Middle Eastern sovereign wealth funds, and these investors will jointly inject $46.7 billion in new equity capital into Paramount Tianwu.

Furthermore, due to the lawsuit process, if the deal is not completed by October 1, Paramount Tianwu will be required to pay so-called “ticking fees” (ticking fees) to Warner Bros. Exploration shareholders from October 1, amounting to approximately US$650 million per quarter. Should Paramount Tianwu finally successfully complete the acquisition, these extension costs will also be borne by the Ellison Family and its partners. If the deal fails, Paramount Sky Dance will not pay these hourly fees, and Warner Bros. Explore will receive $7 billion in transaction termination fees.