Paramount Skydance has officially brought on three Middle Eastern sovereign wealth funds to help finance its $110 billion acquisition of Warner Bros. Discovery.
In an SEC filing on Tuesday, the David Ellison-owned media giant confirmed that Saudi Arabia’s Public Investment Fund, Abu Dhabi’s L’imad 1st SPV 2 Exempt RSC and the Qatar Investment Authority’s QIA TMT Holding LLC will contribute equity financing to the $110 billion deal. Also contributing will be LionTree Investment Fund.
Paramount said the “successful Equity Syndication” is an “important milestone in the WBD transaction process” that their participation would diversify its shareholder base and offer the potential for “strategic and commercial opportunities.” It was not immediately clear what those strategic and commercial opportunities entail.
The investment comes at a tenuous time, with a conflict in Iran destabilizing the region. At home, lawmakers like Sen. Cory Booker have called for federal regulators to conduct a review of the foreign backing. The investment isn’t significant enough to trigger an automatic review by Committee on Foreign Investment in the U.S., although a voluntary one could be called.
For the Middle Eastern sovereign fund, the investment marks one of its biggest investments in U.S. media, with Saudi Arabia’s PIF in the midst of taking video game giant Electronic Arts private, as the countries look to diversify their investments away from energy.
Under the terms of the equity syndication, these investors will receive warrants to purchase Paramount stock that will equal the “20-trading-day average of the daily volume-weighted average price of PSKY Class B Common Stock.” This will be determined as of the third business day prior to the closing of the merger, subject to a ceiling of $16.02 per share and a floor of $12 per share.
One warrant will be issued for each share of Paramount common stock that the equity investor holds. Paramount said the warrants “support its longer-term objective of a wider and deeper public float.”
The move comes after the Ellison family and RedBird Capital Partners, who have said they are prepared to back the deal’s full $47 billion in equity financing, previously disclosed that other financial and strategic partners could be included at closing.
The Middle East funds’ and LionTree’s stakes will be non-voting and the Ellison family and RedBird will continue to hold the largest equity stake in Paramount Skydance as sole owners with 100% of the voting shares. The filing also states that their investments are “structured to comply with all applicable U.S. regulatory requirements (including FCC requirements), and will not impact the timing or likelihood of closing under the [Warner Bros. Discovery] Merger Agreement.”
While the SEC filing does not disclose how much each company is investing, the three Middle Eastern sovereign wealth funds previously committed a total of $24 billion. The Wall Street Journal reported that roughly $10 billion of that will come from PIF. The deal also includes $54 billion of debt commitments from Bank of America, Citigroup and Apollo.
In addition to the Middle East Funds, Jared Kushner’s Affinity Partners previously agreed to contribute financing for Paramount’s Warner Bros. bid, but later backed out. China’s Tencent Holdings, which is a passive investor in Skydance, also previously committed $1 billion but later backed out. While Bloomberg reported last month that Tencent was considering investing several hundred million dollars in the combined entity, the Journal reports that Tencent is not involved in the deal.
Shareholders will vote on the Paramount-Warner Bros. deal during a special meeting on April 23. The deal is also subject to regulatory approval.
The deal is expected to close by the third quarter, though Paramount executives have told employees to prepare for the deal to close as soon as July, according to WSJ.
If it doesn’t close by Sept. 30, shareholders will get a 25 cent per share “ticking fee” — or approximately $650 million — each quarter until closing. If it doesn’t close at all due to regulatory matters, WBD will get a $7 billion termination fee.
