Paramount Sees Potential Strategic, Commercial Opportunities With Middle East Investors

Paramount Skydance confirmed syndication agreements with Middle Eastern funds to back its proposed acquisition of Warner Bros. Discovery and said it believes that the “resulting diversification of its shareholder base, the potential for strategic and commercial opportunities with the various Equity Syndication Parties … [will] enhance long-term shareholder value.”

It confirmed in an SEC filing that Saudi Arabia’s Public Investment Fund; L’Imad, an Abu Dhabi sovereign wealth fund; and TMT Holding, an investment vehicle of the Qatar Investment Authority, have committed to financing the deal as well as LionTree Investment Fund and, of course, affiliates of the Ellisons and RedBird.

“PSKY believes the successful Equity Syndication is an important milestone in the WBD transaction process, and that the resulting diversification of its shareholder base, the potential for strategic and commercial opportunities with the various Equity Syndication Parties, and the value of the Warrants described below, enhance long-term shareholder value. PSKY also believes the Warrants support its longer term objective of a wider and deeper public float.” This issuing of warrants to Paramount shareholders is new and sent the stock shooting higher today. More on that below.

A notable Ellison Guarantee written into the Par-WBD merger agreement requires the billionaire to step up with the full amount equity if the other partners back out. The deal, with an enterprise value of $110 billion, includes a total of $45.72 billion in equity funding.

“The Syndication Assignments do not relieve the Equity Investors of their obligations under the Subscription Agreements or the Ellison Guarantee. To the extent that any Equity Syndication Party does not perform under its Syndication Assignment, the obligation of the Equity Investors to fund the related amount of the Commitments would continue to be required under the Subscription Agreements and the Ellison Guarantee,” the filing said.

It also stressed that the PSKY shares to be issued in the Equity Syndication — so to the Middle East investors — are non-voting. 

In a new wrinkle, Paramount said it will also issue free warrants that entitle public Class B stockholders to acquire a share of stock at the syndication price. PSKY intends to apply to list the Warrants for trading on Nasdaq and they will trade separately from the PSKY Class B Common Stock.

“As a result of the new terms for the Equity Syndication, the previously planned Rights Offering at $16.02 per share will not occur. For shareholders, PSKY believes that the warrant dividend offers greater and more tangible value to shareholders than the previous plan of a rights offering.”

It looks at the warrants as a kind of dividend for Class B holders and will authorized an increase in the number of shares of PSKY Class B Common Stock from 5.5 billion to 7 billion to declare and pay it.

The purchase price per share for each share issued in the Equity Syndication will be based on a formula but have a ceiling of $16.02 per share and a floor of $12. The warrants will allow Class B shareholders to purchase a share at the same price.

More to come