Paramount stock jumps on $24B Gulf backing for Warner deal

Shares of Paramount surged on Tuesday after the company confirmed it is securing roughly [MONEY value="24000000000" currency="usd" notation="long" replace="false"] in equity commitments from Gulf sovereign wealth funds to support its planned takeover of Warner Bros. Discovery.

The stock rose about 10.36% to $10.88, making it one of the top performers in the S&P 500 for the session.

Earlier in the day, shares had climbed even higher, reflecting investor optimism around the funding structure of the deal.

The equity commitments come from major Middle Eastern investors, including Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, and Abu Dhabi-based L’imad Holding Co.

Gulf investors anchor $24 billion equity backing

According to people familiar with the matter, the sovereign wealth funds are expected to provide close to [MONEY value="24000000000" currency="usd" notation="long" replace="false"] in equity financing. The Public Investment Fund alone is set to contribute roughly [MONEY value="10000000000" currency="usd" notation="long" replace="false"].

The investors will be able to purchase Class B nonvoting shares priced between $12.00 and $16.02, according to a regulatory filing. Investment bank LionTree is also part of the equity syndicate.

The agreements are expected to be finalized shortly, marking a significant step in securing financing for the acquisition.

Paramount had previously disclosed that sovereign wealth funds would contribute about $24 billion toward the deal.

The backing from Gulf investors comes at a time of increased economic and political uncertainty in the region, adding a layer of complexity to the transaction.

Deal structure shifts burden from Ellison, RedBird

The funding commitments help reduce the financial burden on RedBird Capital Partners and Larry Ellison, whose family is closely tied to Paramount through CEO David Ellison.

As part of the deal, Paramount issued nearly [MONEY value="47000000000" currency="usd" notation="long" replace="false"] in equity that is “fully backed” by Ellison and RedBird.

While the sovereign wealth funds will contribute significantly, Ellison will remain the guarantor if any investor withdraws, according to filings.

In addition to equity financing, Paramount has secured approximately [MONEY value="54000000000" currency="usd" notation="long" replace="false"] in debt commitments from major institutions including Bank of America, Citigroup, and Apollo Global Management.

The company is in the process of syndicating that debt to other banks and investors.

Regulatory path and deal timeline

Paramount announced in February that it would acquire Warner Bros. Discovery, home to HBO, CNN, and the Harry Potter franchise, in a deal valued at as much as [MONEY value="110000000000" currency="usd" notation="long" replace="false"] including debt.

The company said it would pay $31 per share in cash for Warner stock.

The transaction remains subject to regulatory review in Europe, with executives reportedly preparing for a potential closing as early as the end of July.

The involvement of Gulf investors is not expected to trigger a mandatory review by the Committee on Foreign Investment in the United States (CFIUS), as each investor will hold less than 25% of the combined entity. Similarly, the structure is unlikely to prompt scrutiny from the Federal Communications Commission.

Earlier iterations of the deal had included participation from other investors, including Tencent and Affinity Partners, though both are no longer involved.

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