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Discovery of Warner Bros. shareholders approved the company’s proposed merger with Paramount Skydance in a preliminary vote Thursday, bringing a lively sales process closer to the finish line.
Paramount offered $31 per share for all of Warner Bros. Discovery – its cable television networks like TNT, CNN and Discovery Channel as well as its streaming service HBO Max and film studio Warner Bros. This proposal was the result of several offers since September and a bidding war with Netflix And Comcast.
In late February, Paramount’s increased offer to $31 prompted Netflix to abandon its own proposed deal for WBD’s studio and streaming assets.
Paramount’s offer includes a $7 billion breakup fee in case the proposed merger fails to gain regulatory approval. The company also agreed to pay the $2.8 billion breakup fee WBD owed Netflix for terminating that deal.
“Shareholder approval marks another important step toward completing our acquisition of Warner Bros. Discovery, building on our successful equity and debt syndications and progress on regulatory approvals,” Paramount said in a statement Thursday. “We look forward to closing the transaction in the coming months and realizing the creation of a next-generation media and entertainment company that will better serve both the creative community and consumers.”
Paramount and WBD said the deal is expected to be finalized in the third quarter, pending approval from regulators.
“Over the past four years, our teams have transformed Warner Bros. Discovery and returned the company to industry leadership,” WBD CEO David Zaslav said in a press release Thursday. “Today’s shareholder approval is another key step toward completing this historic transaction that will deliver exceptional value to our shareholders. We will continue to work with Paramount to complete the remaining steps of this process which will create a leading next-generation media and entertainment company.
Institutional Shareholder Services, a leading proxy advisory firm, had recommended shareholders accept the deal, which it said was “the result of a competitive sales process and public bidding war.”
“In addition, shareholders receive a significant premium over the unaffected share price, there is potential risk of non-approval, and the cash consideration provides liquidity and certainty of value to shareholders,” ISS wrote in its report. “Given these factors, support for the proposed transaction is warranted.”
Although WBD shareholders voted “overwhelmingly” in favor of the Paramount deal, according to the WBD statement, they did not support the payments to WBD executives.
This came as no surprise after the previous ISS report advised against approving the proposed golden parachute for Zaslav as part of the deal. Zaslav’s exit plan includes hundreds of millions of dollars in severance and other stock awards related to the Paramount acquisition.
However, as this is a non-binding vote, payments to Zaslav and other leaders will still be made.
The payment — which amounts to more than $800 million — highlights an obscure tax rule originally designed to limit CEO compensation, CNBC recently reported.
ISS cited the $500 million in proposed stock awards, as well as “a recently added excise tax surcharge, valued at approximately $335 million,” or the so-called golden parachute excise tax. Originally created by Congress in the 1980s, the tax was intended to limit what many saw as massive payments to CEOs in the event of a change of control or sale.
—Robert Frank of CNBC contributed to this report.