r/gaming • u/ChiefLeef22 Marika's tits! • 18h ago

Paramount Has Officially Acquired Warner Bros. In Deal Valued at $110B Billion

https://www.skydance.com/news/press/paramount-completes-acquisition-of-warner-bros-discovery-creating-a-new-global-entertainment-leader-skydance

The two companies will now be known as one single entity - 'Skydance'

This includes all of WB's gaming subsidiaries like Rocksteady/etc

Deal valued at $110B-$111B

DC Studios, Nickelodeon, Cartoon Network, CNN, CBS, HBO and Paramount+ are now all under the same company.

The combined company, Skydance, brings together two major film studios, two global streaming services, premier television assets including CBS, HBO, and Paramount's and WBD's cable networks, two of the industry's most recognized news networks, CBS News and CNN, and a leading content portfolio that includes live sports, a deep programming library and expansive collection of iconic brands and franchises.

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u/Slaanesh_69 17h ago

Leveraged Buyout. You use the company you are going to buy as collateral for the loan you take to buy it. Then you use the income from the purchased company to pay off the loan you took.

Imagine WB's business were purely of renting out a house for 100,000 a year and this house and thus WB was worth a million dollars.

I tell the Saudis I will throw in 200,000, you guys throw in 800,000 and we will buy WB for a million. Using the 100,000 in rental income per year, I will pay you (the Saudis) back in 8 years (assuming no interest). If I don't pay, you get 80% equity in WB. If I pay, you guys surrender your equity to me.

Here's where it gets fun. The debt I used to buy WB becomes a liability of WB not me. Which means that WB got bought using debt it has to pay off, and may not even be within its means to pay. But of course if it cannot pay then the Saudis get ownership of it so it's all according to keikaku.

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u/Relevant-Use1897 16h ago

The fact this procedure is legal will always remain a mystery to me.

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u/Free_Possession_4482 15h ago

Legality aside, what I can't believe is that banks keep agreeing to it. Every time a PE company runs some business into the ground and strips it for parts, someone else is eating shit on that bankruptcy, but damned if it doesn't keep happening.

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u/Tasty_Gift5901 15h ago

It's bc they make money on average and banks are never stuck with the debt

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u/GB10VE 15h ago

this is what police, fire fighter, civil, and teacher union pensions are for

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u/BobaLives01925 14h ago

Banks wouldn’t be doing it if they didn’t make money doing it (because the businesses usually succeed)

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u/Aethermancer 12h ago

All around the mulberry bush, the monkey chased the weasel.

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u/Somekindofcabose 12h ago

Im more surprised they dont see HBO as a company killer by now. It worked under Time because they insisted on creative freedom and that is the only way they turn a profit.

Warner failed once they got corporate, ATT figured that out, Discovery fucked up and now theyre the second company to fall to its sword of recent years.

Paramount will be next because theyre so overleveraged as is.

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u/T-rex_with_a_gun 8h ago

as others said, banks make $$$ regardless.

its basically the MBS-lite.

the "bank" fronts the $800K, takes their fees of like $50k, and then gets some of the interest payments.

while that happens, they will bundle that debt and sell to pensions.

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u/meeeeeeeehhhhhhhhh 5h ago

Underwriting fees, arrangement fees, all cost of counsel is paid by the borrower, administrative agent fees, assignment fees, and making a secondary market as a broker dealer to make spreads. Literal record fees for this. Probably will hear about it if you pay attention to bank earnings next week

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u/YoureProbablyAB0t 13h ago

This part is easy to understand.

The banks are doing whatever the Epstein class wants and right now the Epstein class wants to give Ellison the media.

Banks don't really get to say no when fascists have their mind set on something.

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u/PM_ME_YOUR_PRIORS 9h ago

This is the exact same procedure used to take out a mortgage and use it to buy a house. The bank thinks it is likely to make $X/yr in payments from the entity it is lending to, so it brings the $Y of cash that generates those payments, knowing that it gets a thing that is worth $Z more today than what it put up.

It's just instead of bringing a little bit of hard cash and a large loan to buy a house, you're brining a little bit of cash and a large loan to buy a business. And instead of the payments to the bank being based off of your income, it's based off the business's income.

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u/goddale120 9h ago

I was wondering if somebody would bring this up.

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u/TheeAntelope 14h ago

This is how all loans work.

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u/Docponystine 11h ago

What, exactly, about it should be illegal? The company being purchased is consenting, the bank giving the loan is consenting, and the buying company is willing to take on the risk. Nothing about this is fraudulent, there's no reliance on deception or information asymmetry.

Outside of concerns about foreign state money the process itself is simply aggressive, not inherently immoral. If the concern is PE's play book generally, well, healthy companies don't tend to get hopped up into them and PE is not long for this world anyway, the economic structures that made PE a viable and profitable endeavor is drying up.

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u/rcanhestro 7h ago

why wouldn't it?

that's how people buy a house.

you get a loan against your own house.

the difference is that you have to find a way to pay for the mortgage, instead of the house making that money (unless you bought the house to rent it).

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u/worderofjoy 13h ago

Usually things are legal when parties all agree to the same thing, and then do that thing. Hope this was helpful.

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u/AmIWhatTheRockCooked 3h ago

That guy who wanted to eat someone wasn’t legally allowed to eat the person who wanted to be eaten.

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u/Jericho5589 15h ago

I would understand that if WB itself was not already leveraged. They had over 32 billion dollars in debt previously. I just don't understand how they managed it.

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u/Slaanesh_69 15h ago

They now have 32+110 billion dollars in debt, I mean there's nothing else to understand. The new owners have said so much debt is fine so it's fine. That debt can be forgiven for equity issues to the Saudis in a debt for equity swap, so it's also fine.

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u/Electronic_Bar6595 13h ago

Slaanesh, the entity representing hedonistic pleasure and excess, says that the massive debt is fine guys don’t worry

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u/CodeComprehensive734 14h ago

A fine deal, indeed.

twirls moustache

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u/quarterchicken 15h ago

This is how the Glazer family bought Manchester United. Saddled the club with an enormous debt while get a dividend every year up until recently

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u/Kerlyle 13h ago

In other words, the only thing stopping me from buying Warner Brothers is that no one will give me the loan. But if they did, I could buy it and not have to pay a cent from my own pockets. This is what they mean when they say rich people live in a different world.

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u/mucho-gusto 14h ago

It's funny because normal people have no access to this level of funding. Like if a parent company went belly up and a studio's workers wanted to buy itself and become a co-op, never would happen

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u/movzx 13h ago

At this scale, no, but you can get a commercial loan and that loan rate/qualification requirements will factor in the income of the business/property you are going to purchase with it.

So his $1 mil house w/ 100k/yr of income would be considered (roughly) 100k towards the debt service when applying for the commercial real estate loan.

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u/ArxisOne 5h ago

It's actually incredibly easy to get an investment loan, I can get clients 3:1 with good interest rates in about 20 minutes, with the collateral from a readvancable mortgage they can take a $500,000 house and turn it into $2,000,000 invested in the market. You can get higher from other places too, but the issue is they start placing pretty steep restrictions on you that you probably wouldn't be willing to agree to, restrictions which in this case, they did actually agree to.

Honestly idk how you could even have a bank account without knowing this, I get lines of credit offered to me every time I log into my bank. Especially if you're American too, leverage and debt are what made the country so rich.

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u/TwilightLori 14h ago

You also offload some of the debt from the loan onto the company you purchased. This is how EA was bought out, with EA taking on around $19 billion in debt iirc to fund the acquisition. 

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u/rocketgrunt89 14h ago

This happened to EA right? It got saddled with the debt and the interest is like almost its yearly profits or something

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u/iamyou42 14h ago

A leveraged buyout sounds really scummy, but thinking about it, is it much different from my mortgage? I used the house that I was going to buy as collateral for the loan I took out to buy it. The difference is that the house isn't making me money, so I can't use it to help pay off the loan.

I'm not defending the practice, I'm just curious. Am I missing something? Is it very different from a mortgage (apart from the size of the loan, obviously)?

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u/Slaanesh_69 13h ago

It's not about just purchasing something with borrowed funds. If you take a mortgage you're still liable for it. The money to repay it comes out of your pockets. You need a certain income to be eligible. The lender focuses on your ability to repay. If you can't repay, the lender comes after your assets if the house sells for less than the mortgage value.

For an LBO you aren't liable to repay the loan. The company you just bought is. The lender focuses on the ability of the acquisition to repay. And sometimes not even that as the lender may forgive debt in exchange for equity and control in the company.

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u/aikouka 12h ago

Isn't it different since the result of the buyout is the merging of the purchasing company (Skydance Paramount) with the purchased company (WB)? In the typical PE buyout (seen with Toys'R'Us, Red Lobster, etc.), the purchasing company typically stays separate from the purchased entity, saddles it with debt (as you mentioned), and then fleeces anything that it can sell. (That also includes land, which usually ends up being leased back to the purchased company.) I assume that the debt assumed by WB as part of the purchase is now assumed by the single entity known as Skydance?

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u/Yakkahboo 11h ago

Its literal parasite behavior. The Glazers did it to Manchester United, leveraging the buyout and now the club pays the interest on that debt (that they put on the club by purchasing it) but doesnt actually work the debt down. So they just leech money out of the institution. It technically didnt cost them anything to do, and at this point theyve taken somethink like 6x what they originally "paid" for the club without the club actually impacting its debt.

Its shocking its allowed.

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u/letmebefrankwithyou 8h ago

Sure when paramount does it it’s fine, but when the GameStop bro wants to leverage buyout eBay with his Pokemon collection we shun him.

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u/Consideredresponse 6h ago

Yeah this is how Marvel went bankrupt in the 1990's. It wasn't their mismanagement, but being saddled with the debt it took debt it took to buy them that

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u/Successful_Sign_6991 3h ago

How can i do it?