Form 8-K
8-K — Paramount Skydance Corp
Accession: 0001104659-26-063952
Filed: 2026-05-19
Period: 2026-05-19
CIK: 0002041610
SIC: 4833 (TELEVISION BROADCASTING STATIONS)
Item: Regulation FD Disclosure
Item: Financial Statements and Exhibits
Documents
8-K — tm2610616d3_8k.htm (Primary)
EX-99.1 — EXHIBIT 99.1 (tm2610616d3_ex99-1.htm)
EX-99.2 — EXHIBIT 99.2 (tm2610616d3_ex99-2.htm)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): May 19, 2026
Paramount Skydance Corporation
(Exact name of registrant as specified in its
charter)
Delaware
001-42791
99-3917985
(State or other jurisdiction
of
incorporation)
(Commission File Number)
(IRS Employer Identification
Number)
1515 Broadway
New York, New York
10036
(Address
of principal executive
offices)
(Zip
Code)
Registrant’s telephone number, including
area code: (212) 258-6000
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class B Common Stock, $0.001 par value
PSKY
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ¨
Item 7.01 Regulation FD Disclosure.
The WBD Notes Transactions
On May 19, 2026, Paramount Skydance Corporation (“Paramount”)
issued a press release announcing that it had commenced (i) offers to purchase (the “Tender Offers”) for cash, upon the terms
and subject to the conditions set forth in the related offer to purchase (the “Offer to Purchase”), any and all of the identified
notes in certain series of debt securities issued by Discovery Global Holdings, Inc. (formerly WarnerMedia Holdings, Inc.) (the “DGH
Issuer”) and Discovery Communications, LLC (the “DCL Issuer” and together with the DGH Issuer, each a “WBD Issuer”
and collectively the “WBD Issuers”), as applicable, for up to $2.4 billion in principal amount in the aggregate and (ii) offers
to exchange (the “Exchange Offers” and together with the Tender Offers, the “Offers”), any and all of the identified
notes in certain series of debt securities issued by the applicable WBD Issuer for newly issued debt securities of Paramount (the “New
PSKY Notes”), for up to $12.8 billion in principal amount in the aggregate upon the terms and subject to the conditions set forth
in the exchange offer memorandum (the “Offering Memorandum”) provided to Eligible Holders (as defined below) in connection
with the Exchange Offers.
The Offers are being conducted in connection with the proposed acquisition
(the “Acquisition”) by Paramount of Warner Bros. Discovery, Inc. (“WBD”), the parent entity of the WBD Issuers.
The Offers are being made solely by Paramount and are not being made by WBD or the WBD Issuers.
The New PSKY Notes are being offered only to persons reasonably believed
to be qualified institutional buyers as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”),
or, outside the United States, to persons other than “U.S. persons” as defined in Rule 902 of Regulation S under the Securities
Act (in each case “Eligible Holders”). Such New PSKY Notes have not been and will not be registered under the Securities Act,
or the securities laws of any other jurisdiction, and may not be offered or sold in the United States without registration or an applicable
exemption from registration requirements.
Concurrently with, and separately from, the Offers, the WBD Issuers
have commenced solicitations (collectively, the “Consent Solicitations”), upon the terms and subject to the conditions set
forth in the related consent solicitation statement, of consents from holders of each series of the WBD Issuers’ notes that are
subject to the Offers (together, the “WBD Notes”) to certain proposed amendments (the “Proposed Amendments”) to
the indentures governing the WBD Notes that would (i) extend the deadline by which the WBD Issuers are obligated to commence an offer
for junior lien secured notes (“Junior Lien Exchange Notes”) of the WBD Issuers in exchange for the WBD Notes (the “Required
Exchange Transaction”) from December 30, 2026 to the End Date (as defined in the Agreement and Plan of Merger governing the Acquisition
(the “Merger Agreement”)), which is March 4, 2027 (as such date may be extended by the parties to the Merger Agreement); provided
that if the Merger Agreement is validly terminated on or prior to the End Date, such deadline shall mean the date that is the later of
(x) December 30, 2026 and (y) 90 calendar days following the date on which the Merger Agreement is validly terminated, (ii) specify that
such Junior Lien Exchange Notes either: (1) if the Acquisition is consummated, (a) will not include a restrictive liens covenant or a
restricted debt prepayments covenant, (b) will be guaranteed on a senior basis by WBD and each subsidiary of the applicable WBD Issuer
that is an obligor under the senior secured funded debt facility with the lowest lien priority to which WBD is an obligor as of the consummation
of the Acquisition (the “Applicable Take-Out Facility”), (c) will be secured by the assets of WBD, the applicable WBD Issuer,
and such applicable guarantor subsidiaries, with such modifications as deemed necessary or advisable by the applicable WBD Issuer to reflect
liens on such assets that are junior in priority to the Applicable Take-Out Facility, and (d) the requirement that the Required Exchange
Transaction be for the same principal amount of Junior Lien Exchange Notes will be removed, or (2) if the Acquisition is not consummated
or the Merger Agreement is terminated pursuant to its terms, will be substantially consistent (as determined by the applicable WBD Issuer
(in its sole discretion)) with the terms expressly set forth under the “Brief Description of the Junior Lien Exchange Notes”
section of the offer to purchase and consent solicitation statement, dated as of June 9, 2025, subject to certain other modifications,
and (iii) make certain technical and other modifications to reflect the foregoing contemplated amendments and to cure certain ambiguities
in such indentures.
The Offers are, in each case, subject to the satisfaction or waiver
of certain conditions, including, among other things, the conditions that (i) requisite consents for each of the Proposed Amendments in
the Consent Solicitations are received with respect to a particular indenture, or for one or more series of notes issued, pursuant to
such indenture, as applicable, and (ii) the Acquisition is consummated. As a result, the settlement of the Offers is conditioned on the
closing of the Acquisition, and Paramount currently anticipates extending the expiration date for such Offers until the time of the consummation
of the Acquisition.
A copy of the press release is furnished as Exhibit 99.1 hereto and
is incorporated by reference herein.
This current report on Form 8-K does not constitute a solicitation
of any consent in respect of, or an offer to purchase or exchange, or a solicitation of an offer to sell or exchange, any securities.
The Tender Offers, Exchange Offers and Consent Solicitations are being made only pursuant to the applicable Offer to Purchase, Offering
Memorandum and consent solicitation statement that will be provided only to eligible participants in such transactions.
Acquisition Financing Transactions
As previously announced, in connection with the Acquisition, Paramount
entered into a second amended and restated commitment letter, dated as of February 25, 2026 (the “Debt Commitment Letter”),
with Bank of America, N.A., Citi (as defined in the Debt Commitment Letter), Apollo Capital Management, L.P. (“ACM”, on behalf
of one or more investment funds, separate accounts and other entities owned (in whole or in part), controlled, managed and/or advised
by ACM) (collectively, the “Debt Commitment Parties”), BofA Securities, Inc., and Apollo Global Funding, LLC, pursuant to
which the Debt Commitment Parties had agreed to provide, subject to the satisfaction of customary closing conditions, among other things,
a $54.0 billion 364-day senior secured bridge term loan facility (the “Bridge Commitments”), which Bridge Commitments were
subsequently reduced to $49.0 billion.
Paramount provided to Eligible Holders certain disclosures in the Offering
Memorandum, including that Paramount intends to procure permanent financing in lieu of the secured Bridge Commitments in the form of additional
secured credit facilities and secured capital markets indebtedness that is expected to be incurred in the form of first lien and second
lien indebtedness in the investment grade and non-investment grade markets. Specifically, Paramount intends to commence one or more offerings
of senior term loans and/or debt securities to reduce or replace remaining Bridge Commitments (the “Acquisition Financing Transactions”)
currently planned to take the form of (i) $39.5 billion of first-lien secured indebtedness (the “New First Lien Secured Debt”)
and (ii) $12.4 billion of second-lien secured indebtedness (the “New Second Lien Secured Debt”). The ultimate aggregate principal
amount and form of such indebtedness (including the split between New First Lien Secured Debt and New Second Lien Secured Debt), and the
terms to which such indebtedness will be subject, are subject to change and market conditions outside of Paramount’s control, and
Paramount can make no assurances that the Acquisition Financing Transactions will be consummated on favorable terms or at all.
This Current Report on Form 8-K does not constitute an offer to sell
or the solicitation of an offer to buy any notes or other securities, including without limitation in connection with the Acquisition
Financing Transactions. Any offers of such New PSKY Notes will be made only by means of the offering documentation in connection therewith.
Commitment to Deleveraging
In discussions with certain ratings agencies relating to the financing
for the Acquisition, including the Exchange Offers and the potential Acquisition Financing Transactions, Paramount communicated to such
ratings agencies that it is Paramount’s and its controlling stockholder’s plan and commitment, following the consummation
of the Acquisition, to delever below a net debt to adjusted EBITDA multiple of 3.75x by fiscal year 2028 and a net debt to adjusted EBITDA
multiple of 3.0x by fiscal year 2029, and that they will take steps to deliver the deleveraging targets.
Other Information
In connection with the Exchange Offers, Paramount provided certain
updated disclosures to Eligible Holders that it expects to achieve approximately 30% of its expected synergies of over $6 billion by the
first year following the closing of the Acquisition and approximately 70% of such synergies by the second year following the closing of
the Acquisition, with the full run-rate synergies achieved by the third year following the closing of the Acquisition.
Pro Forma Financial Information
Paramount has, by reference to this Current Report, incorporated by
reference into the Offering Memorandum certain unaudited pro forma condensed combined financial statements and other information of Paramount
giving effect to the Acquisition and the other transactions in connection therewith, as well as the Skydance Transactions and the NAI
Transaction (each as defined in Paramount’s Form 10-Q for the quarterly period ended March 31, 2026, filed with the SEC on May 4,
2026), that is attached hereto as Exhibit 99.2. The information contained in such unaudited pro forma condensed combined financial statements
is derived from the historical financial statements of Paramount, WBD and Skydance and has been adjusted to give effect to the Acquisition
and the other transactions in connection therewith, as well as the Skydance Transactions and the NAI Transaction.
The unaudited pro forma condensed combined financial statements referenced
above are provided solely to satisfy Regulation FD requirements and are not intended to comply with Item 9.01 of Form 8-K. The financial
statements and pro forma financial information required by Item 9.01 of Form 8-K will, if required, be filed by Paramount on Form 8-K
in compliance with the requirements of the SEC by not later than 71 calendar days after the date that the initial report on Form 8-K reporting
the Acquisition must be filed in connection with the closing of the Acquisition.
The historical financial statements of Paramount and WBD from which
such unaudited pro forma condensed combined financial statements are derived have been filed in: Paramount’s Annual Report on Form
10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 25, 2026, as amended by Paramount's Form 10-K/A, filed with the SEC on April 24, 2026 as superseded by, and solely to the extent set forth in,
Paramount's Current Report on Form 8-K filed with the SEC on May 13, 2026; Paramount’s Form 10-Q for the quarterly period ended March 31, 2026, filed with the SEC on May 4, 2026; WBD’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 27, 2026; WBD’s Form 10-Q
for the quarterly period ended March 31, 2026, filed with the SEC on May 6, 2026; and Paramount’s Amendment No. 1 to its Current
Report on Form 8-K12B, filed with the SEC on October 23, 2025, for the unaudited condensed consolidated financial statements of Skydance
Media, LLC as of June 30, 2025 and for the six months ended June 30, 2025 and 2024 attached as an exhibit thereto.
General
The information furnished pursuant to this Item 7.01, including Exhibits
99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to
the liabilities under that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act or
the Exchange Act, except as expressly set forth by reference in such filing.
Cautionary Note Concerning Forward-Looking
Statements
This Current Report on Form 8-K contains “forward-looking
statements” regarding the potential Acquisition of WBD, the proposed financing in connection with the Acquisition and Paramount’s
estimated synergies in connection with the Acquisition and the expected timeline for realizing such synergies, and Paramount’s deleveraging
targets following the Acquisition. The reader is cautioned not to rely on these forward-looking statements. These statements are based
on current expectations of future events. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize,
actual results could vary materially from the expectations and projections of Paramount or WBD. Risks and uncertainties include, but are
not limited to: the risk that the closing conditions for the Acquisition will not be satisfied, including the risk that clearances under
applicable antitrust or regulatory laws will not be obtained; the possibility that the transaction will not be completed in the expected
timeframe or at all; potential adverse effects to the businesses of Paramount or WBD during the pendency of the transaction, such as employee
departures or distraction of management from business operations; the risk of stockholder litigation relating to the transaction, including
resulting expense or delay; the potential that the expected benefits and opportunities of the Acquisition, if completed, may not be realized
or may take longer to realize than expected; risks related to Paramount’s streaming business; the adverse impact on Paramount’s
advertising revenues as a result of changes in consumer behavior, advertising market conditions and deficiencies in audience measurement;
risks related to operating in highly competitive and dynamic industries; the unpredictable nature of consumer behavior, as well as evolving
technologies and distribution models; risks related to Paramount’s decisions to invest in new businesses, products, services and
technologies, and the evolution of Paramount’s business strategy; the potential for loss of carriage or other reduction in, or the
impact of negotiations for, the distribution of Paramount’s content; damage to Paramount’s reputation or brands; losses due
to asset impairment charges for goodwill, content and long-lived assets, including finite-lived intangible assets; liabilities related
to discontinued operations and former businesses; increasing scrutiny of, and evolving expectations for, sustainability initiatives; evolving
business continuity, cybersecurity, privacy and data protection and similar risks; challenges in protecting and maintaining Paramount’s
intellectual property rights; domestic and global political, economic and regulatory factors affecting Paramount’s businesses generally;
the inability to hire or retain key employees or secure creative talent; disruptions to Paramount’s operations as a result of labor
disputes; risks and costs associated with the integration of, and Paramount’s ability to integrate, the businesses of Paramount
Global and Skydance successfully and to achieve anticipated synergies; litigation relating to the transactions contemplated by the transaction
agreement entered into on July 7, 2024, between Paramount Global and Skydance, potentially resulting in substantial costs; volatility
in the price of Paramount’s Class B common stock; the effect Paramount’s dual-class capital structure and the concentrated
ownership may have on the price of its Class B common stock or business; risks related to a private sale of a controlling interest in
Paramount, including that Paramount’s stockholders may not realize any change of control premium on shares of Paramount’s
Class B common stock and that Paramount may become subject to the control of a presently unknown third party; risks associated with Paramount’s
status as a “controlled company” under Nasdaq rules, including its exemption from certain corporate governance requirements;
risks associated with the lack of voting rights of Paramount’s Class B common stock; risks that anti-takeover provisions in Paramount’s
amended and restated certificate of incorporation (“Charter”) and amended and restated bylaws, and under Delaware law, could
deter, delay, or prevent a change of control; risks that exclusive forum provisions in Paramount’s Charter could limit a stockholder’s
choice of forum for certain claims and discourage lawsuits against Paramount’s directors and officers; risks that corporate opportunity
provisions in Paramount’s Charter could permit certain persons to pursue competitive opportunities that might otherwise be available
to Paramount; risks associated with Paramount’s holding company structure, including its dependence on distributions from its subsidiaries
to meet tax obligations and other cash requirements; risks related to our indebtedness, including our substantial outstanding debt obligations;
risks related to our ability to incur substantially more debt and our ability to meet the financial and other covenants contained in the
agreements governing our indebtedness; and risks relating to our ability to deleverage the business in accordance with management’s
targets, including risks arising from assumptions, uncertainties and contingencies that may affect our ability to reduce indebtedness;
risks relating to management’s ability to execute on its strategic plan and improve its financial profile and cash flows from operations;
and risks relating to any capital or other financing Paramount may have to raise in order to reduce its indebtedness following the Acquisition.
A further list and description of these risks, uncertainties and other factors and the general risks associated with the respective businesses
of Paramount and WBD can be found in Paramount’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with
the SEC on February 25, 2026, and Paramount’s Form 10-Q for the quarterly period ended March 31, 2026, filed with the SEC on May
4, 2026, including, in each case, in the sections captioned “Cautionary Note Concerning Forward-Looking Statements” and “Item
1A. Risk Factors,” and Paramount’s subsequent filings with the SEC, and WBD’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2025, filed with the SEC on February 27, 2026, and WBD’s Form 10-Q for the quarterly period ended March
31, 2026, filed with the SEC on May 6, 2026, including, in each case, in the sections captioned “Cautionary Note Concerning Forward-Looking
Statements” and “Item 1A. Risk Factors,” and WBD’s subsequent filings with the SEC. Copies of these filings, as
well as subsequent filings, are available online at www.sec.gov, ir.wbd.com or on request from Paramount or WBD. Paramount undertakes
no obligation to update any forward-looking statement as a result of new information or future events or developments, except as required
by law.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number
Description of Exhibit
99.1
Press Release, dated May 19, 2026.
99.2
Unaudited pro forma condensed combined financial statements of Paramount Skydance Corporation as of and for the three months ended March 31, 2026 and for the year ended December 31, 2025.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PARAMOUNT SKYDANCE CORPORATION
By:
/s/ Stephanie Kyoko McKinnon
Name:
Stephanie Kyoko McKinnon
Title:
General Counsel and Secretary
Date: May 19, 2026
EX-99.1 — EXHIBIT 99.1
EX-99.1
Filename: tm2610616d3_ex99-1.htm · Sequence: 2
Exhibit 99.1
Paramount
Skydance Corporation
Announces:
Offer to Purchase for Cash
Any and All of the Identified Notes in each
Series of Existing Tender Offer Notes
and
Offer to Exchange for Newly Issued Notes of
Paramount Skydance Corporation (“New PSKY Notes”)
Any and All of the Identified Notes in each
Series of Existing Exchange Offer Notes
in each case,
of
Discovery
Global Holdings, Inc.
and
Discovery
Communications, LLC
Los Angeles and New York, May 19, 2026 – Paramount Skydance Corporation
(NASDAQ: PSKY) (“Paramount”) today announced that it has commenced (i) offers to purchase (the “Tender Offers”
and each, a “Tender Offer”) for cash, upon the terms and subject to the conditions set forth in the related offer to purchase
(the “Offer to Purchase”), any and all of the identified notes in each series of the Existing Tender Offer Notes (defined
by reference to the table set forth below) issued by Discovery Global Holdings, Inc. (formerly WarnerMedia Holdings, Inc.) (the “DGH
Issuer”) and Discovery Communications, LLC (the “DCL Issuer” and together with the DGH Issuer, each a “WBD Issuer”
and collectively the “WBD Issuers”), as applicable, and (ii) offers to exchange (the “Exchange Offers” and each,
an “Exchange Offer”), upon the terms and subject to the conditions set forth in the related exchange offer memorandum (the
“Offering Memorandum”), any and all of the identified notes in each series of the Existing Exchange Offer Notes (defined by
reference to the table set forth below) (together with the Existing Tender Offer Notes, the “Offer Notes”) issued by the applicable
WBD Issuer for newly issued New PSKY Notes (defined by reference to the table set forth below) to be issued by Paramount with the same
currency, maturity date, interest payment dates and interest rates (with certain exceptions as indicated on the table below) as the Existing
Exchange Offer Notes validly tendered and accepted in the Exchange Offers.
The Tender Offers and Exchange Offers (together, the “Offers”)
are being conducted in connection with the proposed acquisition (the “Acquisition”) by Paramount of Warner Bros. Discovery,
Inc. (“WBD”), the parent entity of the WBD Issuers. The Offers are being made solely by Paramount and are not being made by
WBD or the WBD Issuers.
Concurrently with the Offers, the WBD Issuers have commenced solicitations
(collectively, the “Consent Solicitations”), upon the terms and subject to the conditions set forth in the related consent
solicitation statement, of consents from holders of certain series of notes issued by the WBD Issuers (the “WBD Notes”) to
certain proposed amendments (the “Proposed Amendments”) to the indentures governing the WBD Notes (the “Existing WBD
Indentures”) that would (i) extend the deadline by which the WBD Issuers are obligated to commence an offer for junior lien secured
notes (“Junior Lien Exchange Notes”) of the WBD Issuers in exchange for the WBD Notes (a “Required Exchange Transaction”)
from December 30, 2026 to the End Date (as defined in the Agreement and Plan of Merger governing the Acquisition (the “Merger Agreement”)),
which is March 4, 2027 (as such date may be extended by the parties to the Merger Agreement); provided that if the Merger Agreement
is validly terminated on or prior to the End Date, such deadline shall mean the date that is the later of (x) December 30, 2026 and (y)
90 calendar days following the date on which the Merger Agreement is validly terminated, (ii) specify that such Junior Lien Exchange Notes
either: (1) if the Acquisition is consummated, (a) will not include a restrictive liens covenant or a restricted debt prepayments covenant,
(b) will be guaranteed on a senior basis by WBD and each subsidiary of the applicable WBD Issuer that is an obligor under the senior secured
funded debt facility with the lowest lien priority to which WBD is an obligor as of the consummation of the Acquisition (the “Applicable
Take-Out Facility”), (c) will be secured by the assets of WBD, the applicable WBD Issuer, and such applicable guarantor subsidiaries,
with such modifications as deemed necessary or advisable by the applicable WBD Issuer to reflect liens on such assets that are junior
in priority to the Applicable Take-Out Facility, and (d) the requirement that the Required Exchange Transaction be for the same principal
amount of Junior Lien Exchange Notes will be removed, or (2) if the Acquisition is not consummated or the Merger Agreement is terminated
pursuant to its terms, will be substantially consistent (as determined by the applicable WBD Issuer (in its sole discretion)) with the
terms expressly set forth under the “Brief Description of the Junior Lien Exchange Notes” section of the offer to purchase
and consent solicitation statement, dated as of June 9, 2025, subject to certain other modifications, and (iii) make certain technical
and other modifications to reflect the foregoing contemplated amendments and to cure certain ambiguities in the Existing WBD Indentures.
The WBD Notes include the Offer Notes, but not all WBD Notes are
Offer Notes. In order to be eligible to participate in any Offer, holders of Offer Notes must first deliver their consents in the Consent
Solicitations. In accordance with the terms of the Consent Solicitations, holders of Offer Notes identified by the CUSIP No./Common
Code/ISIN set forth in the tables below who have validly delivered (and not validly revoked) consents in the Consent Solicitations will
receive a temporary CUSIP or ISIN number (a “Temporary Identifier”) for their applicable Offer Notes, which Offer Notes will,
from the period commencing from the receipt by the holders of such Temporary Identifier until the expiration of applicable Offer, trade
separately from the Offer Notes of holders who have not so consented or whose WBD Notes are not Offer Notes, each of which will retain
their existing identifier. Only holders of Offer Notes bearing a Temporary Identifier will be eligible to participate in the applicable
Offer.
The Offers are, in each case, subject to the satisfaction or waiver
of certain conditions, including, among other things, the conditions that (i) requisite consents are received for each of the Proposed
Amendments in the Consent Solicitations and (ii) the Acquisition is consummated. As a result, the settlement of the Offers is conditioned
on the closing of the Acquisition, and Paramount currently anticipates extending the expiration date for such Offers until such time that
would result in the Settlement Date (as defined below) occurring on the closing date of the Acquisition or within one business day thereof.
Tender Offers
The consideration offered in the Tender Offers
per $1,000 in aggregate principal amount of Existing Tender Offer Notes tendered is summarized below.
Existing
Tender Offer Notes to be Tendered
Issuer
of Existing Tender Offer Notes
Aggregate
Principal Amount Outstanding
CUSIP
No. / ISIN(1)
Reference
U.S. Treasury Security
Fixed
Spread (basis points)
Bloomberg
Reference Page(2)
3.755%
Senior Notes due 2027
DGH
Issuer
$1,195,271,000
55903V BL6
US55903VBL62
55903VBK8
U55632 AM2
USU55632AM23
4.250%
U.S.T. due March 15, 2027
0
bps
FIT3
3.950%
Senior Notes due 2028
DCL
Issuer
$1,249,026,000
25470D BS7
US25470DBS71
3.875%
U.S.T. due March 15, 2028
0
bps
FIT4
__________
(1) No
representation is made as to the correctness or accuracy of the identifiers listed in this
press release or printed on the Existing Tender Offer Notes. Such identifiers are provided
solely for the convenience of the Tender Noteholders (as defined below). Tender Noteholders
who have validly delivered (and not validly revoked) their consents pursuant to the Consent
Solicitations will receive a Temporary Identifier for their applicable Existing Tender Offer
Notes, which Existing Tender Offer Notes will, from the period commencing from the receipt
by the holders of such Temporary Identifier until the expiration of applicable Tender Offer,
trade separately from the Existing Tender Offer Notes of holders who have not so consented
and from the WBD Notes that are not Offer Notes, each of which will retain their existing
identifier as reflected in the table set forth above. Only holders of Existing Tender Offer
Notes bearing a Temporary Identifier will be eligible to participate in the Tender Offers.
(2) The Bloomberg Reference Page is provided
for convenience only. To the extent any Bloomberg Reference Page changes prior to the Price
Determination Date (as defined below), the Dealer Managers (as defined herein) will quote
the applicable Reference Treasury Security (as defined below) from the updated Bloomberg
Reference Page.
Holders of Existing Tender Offer Notes (“Tender Noteholders”)
with a Temporary Identifier who validly tender (and do not validly withdraw) their Existing Tender Offer Notes in the applicable Tender
Offer at or prior to 5:00 p.m., New York City time, on June 17, 2026 (the “Tender Expiration Date”), and who beneficially
own such tendered Existing Tender Offer Notes on the Tender Expiration Date, will be eligible to receive, for each $1,000 in aggregate
principal amount of Existing Tender Offer Notes validly tendered and accepted for purchase pursuant to the Tender Offers, consideration
(the “Tender Consideration”) to be determined in the manner described in the Offer to Purchase by reference to the applicable
fixed spread (the “Fixed Spread”) specified in the table above for each series of Existing Tender Offer Notes over the yield
(the “Reference Yield”) based on the bid-side price of the applicable U.S. Treasury Security specified in the table above
(the “Reference Treasury Security”), as calculated at 10:00 a.m., New York City time, on the date on which the Expiration
Date occurs (such time and date, the “Price Determination Date”). For the applicable series of Existing Tender Offer Notes,
if the Tender Offer Yield as determined in accordance with the Offer to Purchase (the “Tender Offer Yield”) is less than the
contractual annual rate of interest for such Existing Tender Offer Notes, then such Tender Consideration will be calculated based on the
par call date; if the Tender Offer Yield as determined in accordance with the Offer to Purchase is higher than or equal to the contractual
annual rate of interest for such series of Existing Tender Offer Notes, then such Tender Consideration will be calculated based on the
maturity date.
Tenders of Existing Tender Offer Notes may be withdrawn at any time
prior to the Tender Expiration Date. There is no premium for tendering prior to the Tender Expiration Date. Upon the terms and subject
to the conditions of the Tender Offers, the settlement date for the Tender Offers will occur promptly after the Tender Expiration Date
and on or promptly following the closing date of the Acquisition (the “Tender Settlement Date”), which is expected to occur
in the third quarter of 2026. In addition to the Tender Consideration, Paramount will pay in cash accrued and unpaid interest on the Existing
Tender Offer Notes accepted in the Tender Offers from the applicable latest interest payment date for such series of Existing Tender Offer
Notes to, but not including, the Tender Settlement Date.
Paramount intends to pay the Tender Consideration and any applicable
accrued and unpaid interest on the Existing Tender Offer Notes accepted in the Tender Offers using cash on hand. Existing Tender Offer
Notes that are accepted and purchased in the Tender Offers will be cancelled and will no longer remain outstanding obligations of the
WBD Issuers.
Exchange Offers
The consideration offered in the Exchange Offers (i) per $1,000 in
aggregate principal amount of U.S. dollar-denominated Existing Exchange Offer Notes tendered and (ii) per €1,000 in aggregate principal
amount of Euro-denominated Existing Exchange Offer Notes tendered, in each case, is summarized below.
Consideration
per $/€1,000 principal amount of Existing Exchange Offer Notes
Existing
Exchange Offer Notes to be Tendered
Issuer
of Existing Exchange Offer Notes
Aggregate
Principal Amount Outstanding
CUSIP
No. / Common Code / ISIN(1)
New
PSKY Notes Offered and Exchange Consideration
4.125%
Senior Notes due 2029
DCL
Issuer
$662,268,000
25470D CA5
US25470DCA54
$1,000
in aggregate principal amount of 6.250% Senior Secured Second Lien Notes due 2029
3.625%
Senior Notes due 2030
DCL
Issuer
$917,517,000
25470D CC1
US25470DCC11
$1,000
in aggregate principal amount of 4.875% Senior Secured Second Lien Notes due 2030
5.000%
Senior Notes due 2037
DCL
Issuer
$454,862,000
25470D BY4
US25470DBY40
$1,000
in aggregate principal amount of 5.000% Senior Secured Second Lien Notes due 2037
6.350%
Senior Notes due 2040
DCL
Issuer
$443,529,000
25470D BZ1
US25470DBZ15
$1,000
in aggregate principal amount of 6.350% Senior Secured Second Lien Notes due 2040
4.950%
Senior Notes due 2042
DCL
Issuer
$130,643,000
25470D BW8
US25470DBW83
$1,000
in aggregate principal amount of 4.950% Senior Secured Second Lien Notes due 2042
4.875%
Senior Notes due 2043
DCL
Issuer
$142,017,000
25470D BX6
US25470DBX66
$1,000
in aggregate principal amount of 4.875% Senior Secured Second Lien Notes due 2043
5.200%
Senior Notes due 2047
DCL
Issuer
$4,230,000
25470D BV0
US25470DBV01
$1,000
in aggregate principal amount of 5.200% Senior Secured Second Lien Notes due 2047
5.300%
Senior Notes due 2049
DCL
Issuer
$248,458,000
25470D BU2
US25470DBU28
$1,000
in aggregate principal amount of 5.300% Senior Secured Second Lien Notes due 2049
4.054%
Senior Notes due 2029
DGH
Issuer
$1,364,619,000
55903V BY8
US55903VBY83
55903VBX0
US55903VBX01
U55632
AT7
USU55632AT75
$1,000
in aggregate principal amount of 6.304% Senior Secured Second Lien Notes due 2029
4.279%
Senior Notes due 2032
DGH
Issuer
$2,702,229,000
55903V BQ5
US55903VBQ59
55903V
BP7
US55903VBP76
$1,000
in aggregate principal amount of 4.904% Senior Secured Second Lien Notes due 2032
5.050%
Senior Notes due 2042
DGH
Issuer
$4,121,969,000
55903V BW2
US55903VBW28
55903V
BV4
US55903VBV45
U55632
AS9
USU55632AS92
$1,000
in aggregate principal amount of 5.050% Senior Secured Second Lien Notes due 2042
5.141%
Senior Notes due 2052
DGH
Issuer
$953,926,000
55903V BU6
US55903VBU61
55903V
BT9
US55903VBT98
$1,000
in aggregate principal amount of 5.141% Senior Secured Second Lien Notes due 2052
4.302%
Senior Notes due 2030
DGH
Issuer
€244,768,000
XS3099830765
309983076
€1,000
in aggregate principal amount of 5.802% Senior Secured Second Lien Notes due 2030
4.693%
Senior Notes due 2033
DGH
Issuer
€329,690,000
XS3099829593
309982959
€1,000
in aggregate principal amount of 5.068% Senior Secured Second Lien Notes due 2033
__________
(1)
No representation is made as to the correctness or accuracy
of the identifiers listed in this press release or printed on the Existing Exchange Offer Notes. Such identifiers are provided solely
for the convenience of the Eligible Holders (as defined below). In accordance with the terms of the Consent Solicitations, holders
of Existing Exchange Offer Notes identified by the CUSIP No./Common Code/ISIN set forth in the table above who have validly delivered
(and not validly revoked) their consents pursuant to the Consent Solicitations will receive a Temporary Identifier for their applicable
Existing Exchange Offer Notes, which Existing Exchange Offer Notes will, from the period commencing from the receipt by the holders
of such Temporary Identifier until the expiration of applicable Exchange Offer, trade separately from the Existing Exchange Offer
Notes of holders who have not so consented and from the WBD Notes that are not Offer Notes, each of which will retain their existing
CUSIP or ISIN number as reflected in the table set forth above. Only Eligible Holders of Existing Exchange Offer Notes bearing a
Temporary Identifier will be eligible to participate in the Exchange Offers.
Holders of Existing Exchange Offer Notes with a Temporary Identifier
who are Eligible Holders and who validly tender (and do not validly withdraw) their Existing Exchange Offer Notes in the applicable Exchange
Offer at or prior to 5:00 p.m., New York City time, on June 17, 2026 (the “Exchange Expiration Date” and together with the
Tender Expiration Date, each an “Expiration Date”), and who beneficially own such tendered Existing Exchange Offer Notes on
the Exchange Expiration Date, will be eligible to receive $1,000 or €1,000, as applicable, in aggregate principal amount of the applicable
series of New PSKY Notes for each $1,000 or €1,000, as applicable, principal amount of Existing Exchange Offer Notes validly tendered
for exchange (the “Exchange Consideration”).
Tenders of Existing Exchange Offer Notes may be withdrawn at any time
prior to the Exchange Expiration Date. There is no cash payment or other premium being offered for tendering prior to the Exchange Expiration
Date. Upon the terms and subject to the conditions of the Exchange Offers, the settlement date for the Exchange Offers will occur promptly
after the Exchange Expiration Date and on or promptly following the closing date of the Acquisition (the “Exchange Settlement Date”
and together with the Tender Settlement Date, each a “Settlement Date”). Interest on the New PSKY Notes will accrue from (and
including) the most recent date on which interest has been paid on the corresponding series of Existing Exchange Offer Notes accepted
in the Exchange Offers. On the first interest payment date following the Exchange Settlement Date, Paramount will pay interest equal to
the sum of (i) all accrued and unpaid interest on the Existing Exchange Offer Notes accepted in the Exchange Offers from the latest applicable
interest payment date for such series of Existing Exchange Offer Notes to, but not including, the Exchange Settlement Date plus (ii) all
accrued and unpaid interest on the New PSKY Notes from (and including) the Exchange Settlement Date to such interest payment date.
The New PSKY Notes will be guaranteed by each of Paramount’s
domestic subsidiaries that is an obligor under Paramount’s existing credit agreement providing for term A loan facilities (the “New
PSKY Notes Guarantors”), which, following the Acquisition, will include WBD and certain of its subsidiaries, and will be secured
on a second lien basis by substantially all of the assets of Paramount and each of the New PSKY Notes Guarantors, subject to certain customary
and other exceptions described in the Offering Memorandum.
Neither Paramount nor the WBD Issuers will receive any cash proceeds
from the Exchange Offers. The Existing Exchange Offer Notes exchanged by Eligible Holders in the Exchange Offers will be retired and cancelled
and will not be reissued.
The Exchange Offers are being made, and the New PSKY Notes and related
guarantees by the New PSKY Notes Guarantors are being offered and issued, pursuant to an exemption from the registration requirements
of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the Securities and
Exchange Commission (the “SEC”) promulgated thereunder, and are also not being registered under any state or foreign securities
laws. The New PSKY Notes may not be offered or sold in the United States or to any U.S. persons (as defined below) except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Exchange Offers will only
be made, and the New PSKY Notes are only being offered and issued, to holders of Existing Exchange Offer Notes who are (a) reasonably
believed to be “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933, as amended (the
“Securities Act”) or (b) not “U.S. persons,” as defined in Rule 902 of Regulation S under the Securities Act (such
holders, “Eligible Holders”), and only Eligible Holders who have completed and returned the eligibility certification are
authorized to receive or review the Offering Memorandum or to participate in the Exchange Offers. The eligibility certification is available
electronically at: https://gbsc-usa.com/eligibility/paramount.
General
Each Offer is a separate offer, and each may be individually consummated,
amended, extended, terminated, or withdrawn, subject to certain conditions and applicable law, at any time in Paramount’s sole discretion,
and without also consummating, amending, extending, terminating, or withdrawing any other Offer with respect to any other series of Offer
Notes. Paramount may terminate an Offer if any of the conditions of such Offer described in the Offer to Purchase or Offering Memorandum,
as applicable, are not satisfied or waived by the applicable Expiration Date, subject to applicable law. In addition, Paramount may waive
the conditions to an Offer without extending such Offer in accordance with applicable law.
The Offers are being made solely by Paramount
and are not being made by WBD or the WBD Issuers. None of Paramount, WBD, the WBD Issuers, the Dealer Managers, the Exchange Agent (as
defined below), the Information Agent (as defined below), the trustees under each of the indentures governing the Offer Notes, the trustee
or collateral agent under the indenture that will govern the New PSKY Notes, or any affiliate of any of them makes any recommendation
as to whether any holder of Offer Notes should tender or refrain from tendering all or any portion of the principal amount of such holder’s
Offer Notes for cash or New PSKY Notes in the applicable Offer. No one has been authorized by any of them to make such a recommendation.
Holders must make their own decision whether to tender Offer Notes in any Offer and, if so, the amount of Offer Notes to tender.
Only Eligible Holders may receive a copy
of the Offering Memorandum and participate in the Exchange Offers. Paramount has engaged Global Bondholder Services Corporation to act
as the exchange agent (in such capacity, the “Exchange Agent”) and information agent (in such capacity, the “Information
Agent”) for the Offers. Questions concerning the Offers, or requests for additional copies of the Offer to Purchase or Offering
Memorandum or other related documents, may be directed to Corporate Actions by telephone at (855) 654-2014 (U.S. toll-free) or (212)
430-3774 (banks and brokers) or by email at contact@gbsc-usa.com. Holders should also consult their broker, dealer, commercial bank,
trust company or other institution for assistance concerning the Offers. The Exchange Offer documents and the Tender Offer documents
can be accessed at the following link: https://gbsc-usa.com/paramount.
Paramount has engaged BofA Securities and
Citigroup as dealer managers (in such capacity, the “Dealer Managers”) for the Offers. Holders with questions regarding the
Offers should contact BofA Securities, Inc. at +1 (888) 292-0070 (toll-free) or +1 (980) 388-3646 (collect) or debt_advisory@bofa.com
or Citigroup Global Markets Inc. at +1 (800) 558-3745 (toll free) or +1 (212) 723-6106 or ny.liabilitymanagement@citi.com. Latham &
Watkins LLP is serving as legal counsel to Paramount and Cahill Gordon & Reindel LLP is serving as legal counsel to the Dealer Managers.
This press release is for informational purposes
only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security, including the Existing Tender Offer
Notes, the Existing Exchange Offer Notes or the New PSKY Notes, and does not constitute an offer, solicitation (including pursuant to
the Consent Solicitations), or sale of any security in any jurisdiction in which such offer, solicitation, or sale would be unlawful.
About Paramount, a Skydance Corporation
Paramount, a Skydance Corporation is a next-generation global media
and entertainment company, comprised of three business segments: Studios, Direct-to-Consumer, and TV Media. PSKY’s portfolio unites
legendary brands, including Paramount Pictures, Paramount Television, CBS, CBS News, CBS Sports, Nickelodeon, MTV, BET, Comedy Central,
Showtime, Paramount+, Pluto TV, and Skydance Animation, Film, Television, Interactive/Games, and Paramount Sports Entertainment.
Cautionary Note Concerning Forward-Looking Statements
This communication contains “forward-looking statements”
regarding the Acquisition and the other transaction referred to herein. The reader is cautioned not to rely on these forward-looking statements.
These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or known or unknown risks
or uncertainties materialize, actual results could vary materially from the expectations and projections of Paramount. Risks and uncertainties
include, but are not limited to: the risk that the closing conditions for the Acquisition will not be satisfied, including the risk that
clearances under applicable antitrust or regulatory laws will not be obtained or will be obtained subject to conditions that are not anticipated;
the possibility that the transactions described herein will not be completed in the expected timeframe or at all; the occurrence of any
event, change or other circumstances that could give rise to the termination of the Acquisition; potential adverse effects to the businesses
of Paramount or WBD during the pendency of the Acquisition, such as employee departures or distraction of management from business operations;
negative effects of the announcement or the consummation of the Acquisition on the market price of WBD or Paramount stock; the risk of
stockholder litigation relating to the Acquisition, including resulting expense or delay; the potential that the expected benefits and
opportunities of the Acquisition, if completed, may not be realized or may take longer to realize than expected; risks related to the
streaming business of the post-Acquisition combined business (the “Combined Company”); the adverse impact on the Combined
Company’s advertising revenues as a result of changes in consumer behavior, advertising market conditions, and deficiencies in audience
measurement; risks related to operating in highly competitive and dynamic industries; the unpredictable nature of consumer behavior, as
well as evolving technologies and distribution models; risks related to the Combined Company’s decision to invest in new businesses,
products, services, and technologies, and the evolution of the Combined Company’s business strategy; the potential for loss of carriage
or other reduction in, or the impact of negotiations for, the distribution of the Combined Company’s content; damage to the Combined
Company’s reputation or brands; losses due to asset impairment charges for goodwill, content and long-lived assets, including finite-lived
intangible assets; liabilities related to discontinued operations and former businesses; increasing scrutiny of, and evolving expectations
for, sustainability initiatives; evolving business continuity, cybersecurity, privacy and data protection and similar risks; challenges
in protecting and maintaining the Combined Company’s intellectual property rights; domestic and global political, economic and regulatory
factors affecting the Combined Company’s business generally or the Acquisition; the inability to hire or retain key employees or
secure creative talent; disruptions to the Combined Company’s operations as a result of labor disputes; risks and costs associated
with the integration of, and Paramount’s ability to integrate, the businesses of Paramount Global, Skydance Media, LLC, and WBD
successfully and to achieve anticipated synergies, including in the amounts or on the timelines anticipated to realize such synergies;
litigation related to the Acquisition and other matters or transactions; risks associated with the Combined Company’s holding company
structure, including its dependence on distributions from its subsidiaries to meet tax obligations and other cash requirements; risks
related to our indebtedness, including our substantial outstanding debt obligations, our ability to incur substantially more debt and
our ability to meet the financial and other covenants contained in the agreements governing the indebtedness of Paramount, WBD, or the
Combined Company. A further list and description of these risks, uncertainties and other factors and the general risks associated with
the respective businesses of Paramount and WBD can be found in Paramount’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2025, filed with the SEC on February 25, 2026, including in the sections captioned “Cautionary Note Concerning Forward-Looking
Statements” and “Item 1A. Risk Factors,” Paramount’s most recently filed Quarterly Report on Form 10-Q for the
quarter ended March 31, 2026, including in the sections captioned “Cautionary Note Concerning Forward-Looking Statements”
and “Item 1A. Risk Factors,” and Paramount’s subsequent filings with the SEC, and in WBD’s Annual Report on Form
10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 27, 2026, including in the section captioned “Item
1A. Risk Factors,” WBD’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the SEC on May 6,
2026, and WBD’s subsequent filings with the SEC. Neither Paramount nor WBD undertakes to update any forward-looking statement as
a result of new information or future events or developments, except as required by law.
Media Contacts:
Melissa Zukerman / Laura Watson
msz@paramount.com / laura.watson@paramount.com
Brunswick Group
ParamountSkydance@brunswickgroup.com
Gagnier Communications
Dan Gagnier
dg@gagnierfc.com
Investor Contacts:
Kevin Creighton / Logan Thomas
kevin.creighton@paramount.com / logan.thomas@paramount.com
EX-99.2 — EXHIBIT 99.2
EX-99.2
Filename: tm2610616d3_ex99-2.htm · Sequence: 3
Exhibit 99.2
PARAMOUNT SKYDANCE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
Summary of the Transactions
Warner Bros. Discovery Inc. Acquisition
On February 27, 2026, Paramount Skydance
Corporation (“Paramount,” or the “Company,”) and Prince Sub Inc., a Delaware corporation and wholly owned subsidiary
of Paramount (“Merger Sub”) entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise
modified in accordance with the terms, the “WBD Merger Agreement”) with Warner Bros. Discovery, Inc. a Delaware corporation
(“WBD”), pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into WBD, with
WBD surviving as a wholly owned subsidiary of Paramount (the “Acquisition”).
The Acquisition is expected to be accounted for
as a business combination under ASC 805, Business Combinations, with the Company identified as the accounting acquirer. In identifying
the Company as the accounting acquirer, management considered the structure of the Acquisition and other actions contemplated by the
WBD Merger Agreement, relative outstanding voting and equity interests, and the composition of the post-Acquisition board of directors.
No single factor was the sole determinant in the overall conclusion that Paramount is the accounting acquirer; rather all factors were
considered in arriving at such conclusion.
At the effective time of the Acquisition (“the
Effective Time”), each share of WBD Common Stock issued and outstanding immediately prior to the Effective Time (other than shares
of WBD Common Stock to be cancelled for no consideration in accordance with the WBD Merger Agreement or as to which appraisal rights
have been properly exercised) will be converted into the right to receive an amount in cash equal to $31.00, without interest, plus,
if applicable, the Ticking Consideration (collectively, the “Merger Consideration”). The “Ticking Consideration”
will be an amount in cash equal to $0.00277778 multiplied by the number of calendar days elapsed after September 30, 2026 to and
including the closing date of the Acquisition (which for the avoidance of doubt, will not exceed $0.25 per 90 calendar day period). Total
cash consideration payable to WBD common stockholders is estimated at $77.7 billion, calculated based on WBD Common Stock outstanding
as of April 23, 2026, excluding any applicable Ticking Consideration as the Company assumes for the purposes of these pro forma
financial statements that the transaction will close prior to September 30, 2026, and any cash payable with respect to equity awards
as described under “—Treatment of Equity Awards” below.
Treatment of Equity Awards
Stock Options
At the Effective Time:
· Each
stock option outstanding to purchase shares of WBD Common Stock granted under any WBD stock
plan that is (x) vested as of the Effective Time or (y) held by a former employee
or service provider of WBD, will be cancelled and converted into the right to receive an
amount in cash, without interest, equal to the product obtained by multiplying (i) the
excess if any, of the Merger Consideration over the per share exercise price for such vested
stock option by (ii) the total number of shares of WBD Common Stock subject to such
vested stock option.
· Each
stock option (whether vested or unvested) with an exercise price equal to or in excess of
the Merger Consideration will be cancelled without consideration.
· Each
unvested stock option with an exercise price below the Merger Consideration will be assumed
by Paramount and automatically converted into the contingent right to receive an amount in
cash, without interest, equal to the product obtained by multiplying (i) the excess
of the Merger Consideration over the per share exercise price for such unvested stock option
by (ii) the total number of shares of WBD Common Stock subject to such unvested stock
option immediately prior to the Effective Time, and will remain subject to generally the
same terms and conditions (including any applicable terms relating to accelerated vesting
upon qualifying terminations of employment and timing and form of payment) that applied to
the corresponding unvested stock option immediately prior to the Effective Time.
Restricted Stock Units (“RSUs”),
including Performance-Based RSUs (“PRSUs”)
At the Effective Time:
· Each
WBD RSU that is vested in accordance with its terms or that is held by a non-employee member
of the board of directors of WBD as of the Effective Time will be cancelled and converted
into the right to receive the Merger Consideration with respect to each share of WBD Common
Stock underlying such vested WBD RSU, with the number of shares of WBD Common Stock subject
to such vested WBD RSU granted with performance-based vesting conditions determined as described
below.
-1-
· Each
WBD RSU that is outstanding immediately prior to the Effective Time and that is not a vested
WBD RSU, will be assumed by Paramount and automatically converted into the contingent right
to receive an amount in cash, without interest, equal to the product of (i) the Merger
Consideration, multiplied by (ii) the total number of shares of WBD Common Stock subject
to such unvested WBD RSU immediately prior to the Effective Time, and remaining subject to
generally the same terms and conditions (including any applicable terms relating to accelerated
vesting upon qualifying terminations of employment and timing and form of payment) that applied
to the corresponding unvested WBD RSU immediately prior to the Effective Time.
· The
total number of unvested WBD RSUs with performance-based vesting conditions expected to vest
will be determined by assuming (i) in respect of such unvested WBD RSUs for which the
applicable performance period has been completed prior to the Effective Time, actual performance,
and (ii) in respect of such unvested WBD RSUs for which the applicable performance period
has not been completed prior to the Effective Time, achievement at the greater of (x) target
performance and (y) actual performance extrapolated through the end of the applicable
performance period based on actual performance through the Effective Time, determined by
the board of directors of WBD or a committee thereof in good faith and consistent with past
practice.
Deferred and Notional Equity Units
At the Effective Time:
· Each
deferred stock unit (“DSU”) that is outstanding immediately prior to the Effective
Time will be assumed by Paramount and automatically converted into a right to receive an
amount in cash, without interest, equal to the product obtained by multiplying (A) the
Merger Consideration by (B) the number of shares of WBD Common Stock subject to such
DSU immediately prior to the Effective Time (the “WBD DSU Consideration”), with
such DSU Consideration remaining subject to the same terms and conditions that applied to
the corresponding DSU immediately prior to the Effective Time.
· Each
notional investment unit with respect to shares of WBD Common Stock (a “WBD Notional
Unit”) subject to WBD’s Non-Employee Directors Deferral Plan and WBD’s
Supplemental Retirement Plan (each, a “WBD DC Plan”) that is outstanding immediately
prior to the Effective Time will be assumed by Paramount and automatically converted into
a notional unit with respect to a number of shares of Class B common stock, par value
$0.001 per share (“Paramount Class B Common Stock”), of Paramount (a “Paramount
Notional Unit”) equal to the product obtained by multiplying (A) the Equity Award
Exchange Ratio (as defined below) by (B) the number of shares of WBD Common Stock subject
to such WBD Notional Unit immediately prior to the Effective Time, with each such Paramount
Notional Unit remaining subject to the same terms and conditions that applied to the corresponding
WBD Notional Unit immediately prior to the Effective Time (including with respect to timing
and form of payment), as set forth in the applicable WBD DC Plan. The “Equity Award
Exchange Ratio” is determined by dividing (i) the Merger Consideration by (ii) the
per share volume-weighted average trading price of Paramount Class B Common Stock for
the fifteen consecutive trading days ending on (and including) the trading day that is three
trading days prior to the Closing Date.
Financing
The Company expects to utilize a combination
of equity financing and committed debt financing to fund the Acquisition. The Company has entered into equity subscription agreements
(“Subscription Agreements”) providing for up to $46.7 billion of equity financing from affiliates of The Lawrence J. Ellison
Revocable Trust and $250.0 million from RedBird Capital Partners Fund IV (Master), L.P (collectively the “Equity Investors”),
pursuant to a private placement of Paramount Class B Common Stock (such private placement format being referred to herein as a private
investment in public equity, or “PIPE”, arrangement.
The Equity Investors have assigned their subscription
rights thereunder (the “Equity Syndication”) to a group of institutional investors (each, an "Equity Syndication Party"),
comprising affiliates of the Equity Investors, The Public Investment Fund, L'Imad 1st SPV 2 Exempt RSC LTD (an investment vehicle of
L'Imad Holding, an Abu Dhabi sovereign wealth fund), QIA TMT Holding LLC (an investment vehicle of the Qatar Investment Authority), and
LionTree Investment Fund, L.P. The aggregate allocations cover the full amount committed by the Equity Investors. At closing, the Company
will issue to each Equity Syndication Party a number of newly issued nonvoting shares of Paramount Class B Common Stock (or securities
convertible into shares) equal to its allocated amount divided by the Syndication Purchase Price, defined as the 20-trading-day daily
volume-weighted average price of Paramount Class B Common Stock determined as of the third business day prior to the closing of
the Acquisition, subject to a ceiling of $16.02 per share and a floor of $12.00 per share (the “Syndication Purchase Price”).
This syndication does not relieve the Equity Investors of their contractual commitments made to the Company.
Each holder of Paramount Class B Common
Stock (excluding any Equity Investor or affiliate thereof) as of a record date to be determined will receive, without payment of any
consideration, one 10-year warrant (each, a “Warrant”) for each share held, exercisable at an initial exercise
price per share equal to the Syndication Purchase Price and subject to customary anti-dilution and fundamental change make-whole adjustments.
Beginning on the third anniversary of issuance, the Company may call the Warrants if the closing price of Paramount Class B Common
Stock equals or exceeds $30.00 for at least 20 trading days in any 30 consecutive trading day period.
-2-
In addition, the Company entered into committed
debt financing arrangements including, subject to the satisfaction of customary closing conditions, a $54 billion 364-day senior secured
bridge term loan facility and $3.5 billion of commitments under a 364-day senior secured revolving credit facility (“Bridge Commitments”),
which were reduced to $49.0 billion and zero, respectively, as a result of entering into $5.0 billion of permanent term loan financing
and a $5.0 billion revolving credit facility in connection with the Pro Rata Credit Agreement described below. The Pro Rata Credit Agreement
provides for (i) $2.5 billion of three-year Term A-1 loans (“Term A-1 Loans”), (ii) $2.5 billion of five-year Term
A-2 loans (“Term A-2 Loans”), and (iii) $5.0 billion of five-year revolving credit commitments. The unaudited pro forma
condensed combined financial statements included herein assume that Paramount will utilize the full $5 billion provided from the Term
A-1 Loans and Term A-2 Loans and will utilize approximately $49.0 billion in funding from the Bridge Commitments, and therefore does
not assume the incurrence of any permanent financing, other than the Term A-1 Loans and Term A-2 Loans.
The Company intends to procure permanent financing
in lieu of the secured Bridge Commitments in the form of additional secured credit facilities and secured capital markets indebtedness
that is expected to be incurred in the form of first lien and second lien indebtedness in the investment grade and non-investment grade
markets. Specifically, Paramount intends to commence one or more offerings of senior term loans and/or debt securities to reduce or replace
remaining Bridge Commitments (the “Acquisition Financing Transactions”) currently planned to take the form of (i) $39.5
billion of first-lien secured indebtedness (the “New First Lien Secured Debt”) and (ii) $12.4 billion of second-lien
secured indebtedness (the “New Second Lien Secured Debt”). The ultimate aggregate principal amount and form of such indebtedness
(including the split between New First Lien Secured Debt and New Second Lien Secured Debt), and the terms to which such indebtedness
will be subject, is subject to change and market conditions outside of the Company’s control, and the Company can make no assurances
that the Acquisition Financing Transactions will be consummated on favorable terms or at all. As such, for purposes of these unaudited
pro forma condensed combined financial statements, it is assumed that funding will come from the Bridge Commitments and not from the
Acquisition Financing Transactions.
The Company also intends to refinance and terminate
WBD’s $5.0 billion accounts receivable securitization program (of which $3.9 billion is utilized as of March 31, 2026) within
three months of the closing of the Acquisition. The terms of such refinancing are unknown and therefore have not been reflected within
the pro forma financial statements.
In connection with the execution of the WBD Merger
Agreement, Paramount paid the termination fee of $2.8 billion (the “Netflix Termination Fee”) due to Netflix, Inc. under
the Amended and Restated Agreement and Plan of Merger, dated as of January 19, 2026, by and among WBD, Netflix, Inc, Nightingale
Sub, Inc., and New Topco 25, which was terminated prior to the execution of the WBD Merger Agreement. The Netflix Termination Fee
is reflected in Paramount’s historical balance sheet at March 31, 2026.
The consummation of the Acquisition is subject
to customary closing conditions, including receipt of required regulatory approvals, and is not subject to a financing condition. As
of the date of this filing, the Acquisition has not been consummated but is considered probable for purposes of these pro forma financial
statements.
Exchange Offers and Tender Offers
In connection with the Acquisition, the Company
is offering to exchange any and all of the Existing WBD Notes (defined below) for the applicable series of newly issued New PSKY Notes
(defined below) (each offer to exchange, an “Exchange Offer” and together, the “Exchange Offers”). The New PSKY
Notes will be issued by the Company.
The Existing WBD Notes were issued by Discovery
Communications, LLC, a Delaware limited liability company (the “DCL Issuer”), and Discovery Global Holdings, Inc. (formerly
WarnerMedia Holdings, Inc.), a Delaware corporation (the “DGH Issuer” and, together with the DCL Issuer, the “Existing
WBD Issuers”).
The consideration offered in the Exchange Offers
(i) per $1,000 in aggregate principal amount of U.S. dollar-denominated Existing WBD Notes tendered and (ii) per €1,000
in aggregate principal amount of Euro-denominated Existing WBD Notes tendered, in each case, is summarized below:
-3-
Consideration
per $/€1,000 principal amount of Existing WBD Notes
Existing
WBD Notes to be
Exchanged
Issuer
of
Existing WBD
Notes
Aggregate
Principal
Amount
Outstanding
New
PSKY Notes Offered and Exchange Consideration
4.125%
Senior Notes due 2029
DCL
Issuer
$662,268,000
$1,000
in aggregate principal amount of 6.250% Senior Secured Second Lien Notes due 2029
3.625%
Senior Notes due 2030
DCL
Issuer
$917,517,000
$1,000
in aggregate principal amount of 4.875% Senior Secured Second Lien Notes due 2030
5.000%
Senior Notes due 2037
DCL
Issuer
$454,862,000
$1,000
in aggregate principal amount of 5.000% Senior Secured Second Lien Notes due 2037
6.350%
Senior Notes due 2040
DCL
Issuer
$443,529,000
$1,000
in aggregate principal amount of 6.350% Senior Secured Second Lien Notes due 2040
4.950%
Senior Notes due 2042
DCL
Issuer
$130,643,000
$1,000
in aggregate principal amount of 4.95% Senior Secured Second Lien Notes due 2042
4.875%
Senior Notes due 2043
DCL
Issuer
$142,017,000
$1,000
in aggregate principal amount of 4.875% Senior Secured Second Lien Notes due 2043
5.200%
Senior Notes due 2047
DCL
Issuer
$4,230,000
$1,000
in aggregate principal amount of 5.200% Senior Secured Second Lien Notes due 2047
5.300%
Senior Notes due 2049
DCL
Issuer
$248,458,000
$1,000
in aggregate principal amount of 5.300% Senior Secured Second Lien Notes due 2049
4.054%
Senior Notes due 2029
DGH
Issuer
$1,364,619,000
$1,000
in aggregate principal amount of 6.304% Senior Secured Second Lien Notes due 2029
4.279%
Senior Notes due 2032
DGH
Issuer
$2,702,229,000
$1,000
in aggregate principal amount of 4.904% Senior Secured Second Lien Notes due 2032
5.050%
Senior Notes due 2042
DGH
Issuer
$4,121,969,000
$1,000
in aggregate principal amount of 5.050% Senior Secured Second Lien Notes due 2042
5.141%
Senior Notes due 2052
DGH
Issuer
$953,926,000
$1,000
in aggregate principal amount of 5.141% Senior Secured Second Lien Notes due 2052
4.302%
Senior Notes due 2030
DGH
Issuer
€244,768,000
€1,000
in aggregate principal amount of 5.802% Senior Secured Second Lien Notes due 2030
4.693%
Senior Notes due 2033
DGH
Issuer
€329,690,000
€1,000
in aggregate principal amount of 5.068% Senior Secured Second Lien Notes due 2033
Concurrently with the Exchange Offers, the Company
is offering to purchase for cash (the “Tender Offers”) any and all of (i) the DCL Issuer’s $1.249 billion aggregate
principal amount of 3.950% Senior Notes due 2028 and (ii) the DGH Issuer’s $1.195 billion aggregate principal amount of 3.755%
Senior Notes due 2027.
For purposes of these pro forma financial statements,
it is assumed that 100% of the $12.8 billion principal amount of Existing WBD Notes subject to the Exchange Offers and $2.4 billion of
Existing WBD Notes subject to the Tender Offers will, in each case, be exchanged or tendered, as applicable, in full in the applicable
Exchange Offer or Tender Offers. The ultimate aggregate principal amount of New PSKY Notes exchanged for Existing WBD Notes in the
Exchange Offers, and the terms to which such indebtedness will be subject, and the amount of Existing WBD Notes tendered in the Tender
Offers is subject to change based on the ultimate results of such Exchange Offers and Tender Offers, including as a result of market
conditions or other factors outside of the Company’s control, and the Company can make no assurances that the Exchange Offers and
Tender Offers will be consummated in accordance with such assumptions or at all.
-4-
Completed Skydance Transactions and NAI Transaction
On August 7, 2025, pursuant to a transaction
agreement dated July 7, 2024, Paramount Global and Skydance Media, LLC (“Skydance”) became wholly owned subsidiaries
of Paramount Skydance Corporation (the “Skydance Transactions”). Substantially concurrently with the closing of the Skydance
Transactions, Pinnacle Media Ventures, LLC, Pinnacle Media Ventures II, LLC and Pinnacle Media Ventures III, LLC, each entities controlled
by the Ellison Family (as defined below), and RB Tentpole Holdings LP (the “NAI Equity Investors”) acquired 100% of the equity
interests of Harbor Lights Entertainment, Inc. (f/k/a National Amusements, Inc. (“NAI”)), from the NAI’s
shareholders under a purchase and sale agreement and, through their indirect ownership of NAI, the NAI Equity Investors received an aggregate
of 31.5 million shares of Class A common stock and 32.0 million shares of Class B common stock of Paramount Skydance Corporation
(the “NAI Transaction”). Following the closing of the Skydance Transactions and the NAI Transaction, entities controlled
by the Ellison Family indirectly hold approximately 77.5% of the Class A common stock of Paramount Skydance Corporation through
their collective approximate 77.5% ownership interest in NAI, which was renamed Harbor Lights Entertainment Inc., and as a result the
Ellison Family is the controlling stockholder and ultimate parent (“Ultimate Parent”) of Paramount. For the purpose of determining
the controlling ownership of Paramount, the Ellison family is comprised of Lawrence J. Ellison and David Ellison (the “Ellison
Family”). David Ellison is the son of Lawrence J. Ellison, and Lawrence J. Ellison and David Ellison are accordingly considered
immediate family members
In connection with the Skydance Transactions,
PIPE investors, including the NAI Equity Investors, made an investment of $6.0 billion into Paramount Skydance Corporation in exchange
for 400 million shares of Class B common stock at $15.00 per share and the NAI Equity Investors received, in connection with their
PIPE investment an aggregate of 200 million five-year warrants exercisable at $30.50 per share (subject to customary anti-dilution adjustments).
Approximately $4.5 billion of the PIPE proceeds were used to satisfy electing stockholders’ cash consideration in connection with
a cash-stock election offered to Paramount Global stockholders, with the remaining approximately $1.5 billion provided to Paramount Skydance
Corporation. As further described in Note 1, Paramount’s financial results for the year ended December 31, 2025 are presented
in two distinct periods to indicate a new basis of accounting established for Paramount Global’s net assets upon the closing of
the Skydance Transactions and NAI Transaction. The periods prior to August 7, 2025 include only Paramount Global and are identified
as “Predecessor”, and the periods beginning on August 7, 2025 reflect Paramount Skydance Corporation and are identified
as “Successor”.
Unaudited Pro Forma Condensed Combined Financial
Statements
The following unaudited pro forma condensed combined
financial statements have been prepared in accordance with Article 11 of Regulation S-X and are presented to illustrate the effects
of the completed Skydance Transactions and NAI Transaction and the Acquisition, collectively, “The Transactions”.
The unaudited pro forma Condensed Combined Balance
Sheet as of March 31, 2026 combines the historical consolidated balance sheet of Paramount as of March 31, 2026 and the historical
consolidated balance sheet of WBD as of March 31 2026, giving effect to the Acquisition as if it had occurred on March 31,
2026.
The unaudited pro forma Condensed Combined Statement
of Operations for the three months ended March 31, 2026 combines the historical Consolidated Statement of Operations of Paramount
for the three months ended March 31, 2026 and the historical Consolidated Statement of Operations of WBD for the three months ended
March 31, 2026, and gives effect to the Acquisition as if it had occurred on January 1, 2025.
The unaudited pro forma Condensed Combined Statement
of Operations for the year ended December 31, 2025 combines the Adjusted Combined Statement of Operations for the year ended December 31,
2025 of Paramount and the historical Consolidated Statement of Operations for the year ended December 31, 2025 of WBD, giving effect
to the Transactions as if they had occurred on January 1, 2025.
The Adjusted Combined Statement of Operations
of Paramount reflects the combination of (i) the historical consolidated Statement of Operations of Paramount Global (Predecessor)
for the period from January 1, 2025 through August 6, 2025 (ii) the historical results of Skydance for the same period
(iii) the historical consolidated Statement of Operations of Paramount Skydance Corporation from August 7, 2025 to December 31,
2025 (Successor) and (iv) the effects of the Skydance Transactions and NAI Transaction as if they had closed on January 1,
2025. As a result of the pushdown of the Ultimate Parent’s basis, the net assets of Paramount Global were recorded at their fair
value as of the close of the Skydance Transactions and NAI Transaction. No adjustments to the August 7, 2025 to December 31,
2025 Successor period are necessary, as the impacts from the Skydance Transactions and NAI Transaction are included in Paramount’s
historical results for this period.
The impact of the Acquisition, including the
committed equity financing, on the outstanding shares and equity of Paramount is illustrated in Note 8.
-5-
The pro forma transaction accounting adjustments
to adjust WBD’s net assets to preliminary estimates of fair value are based on information available to the Company as of the date
of this filing. The fair value estimates made herein may differ materially based upon the finalization of appraisals and other valuation
analyses, which is expected no later than one year from the closing date of the Acquisition. These unaudited pro forma condensed combined
financial statements are presented for illustrative purposes only and do not necessarily reflect the operating results or financial position
that would have occurred if the Transactions had been consummated on the dates indicated, nor are they necessarily indicative of the
results of operations or financial condition that may be expected for any future period or date. Accordingly, such information should
not be relied upon as an indicator of future performance, financial condition or liquidity. Additionally, the unaudited pro forma condensed
combined financial statements do not give effect to revenue synergies, operating efficiencies or cost savings that may be achieved with
respect to the combined company. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma
condensed combined financial statements.
The unaudited pro forma condensed combined financial
statements should be read in conjunction with the following materials:
· The
accompanying notes to the unaudited pro forma condensed combined financial statements;
· Paramount's historical unaudited consolidated financial statements and the notes thereto contained
in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, filed on May 4,
2026, and the historical audited consolidated financial statements and the notes thereto for Paramount Global (Predecessor) for the
period from January 1, 2025 to August 6, 2025 and Paramount Skydance Corporation (Successor) as of December 31, 2025 and for the
period from August 7, 2025 to December 31, 2025 contained in Paramount’s Current Report on Form 8-K, filed on May 13,
2026;
· Skydance’s
historical unaudited condensed consolidated financial statements for the six-month period
ended and as of June 30, 2025 contained in the Company’s Form 8-K/A filed
October 23, 2025; and
· WBD’s
historical unaudited consolidated financial statements and the notes thereto contained in
WBD’s Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2026, filed on May 6, 2026, and the historical audited consolidated financial statements
and the notes thereto contained in WBD’s Annual Report on Form 10-K for the year
ended December 31, 2025, filed on February 27, 2026.
-6-
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AT MARCH 31, 2026
(In millions)
Pro Forma
Adjustments
Paramount
Skydance
Corp.
WBD
Adjusted(2)
WBD
Transaction
Accounting
Adjustments
Debt
Financing
Adjustments (5)
Pro Forma
Assets
Current Assets:
Cash and cash equivalents
$ 1,941
$ 3,264
$ (93,920 )
(3a)
$ 53,298
(5a)
$ 8,975
46,906
(8d)
(2,458 )
(5d)
(56 )
(5c)
Receivables, net
6,850
5,009
(527 )
(4)
-
11,332
Programming and other inventory
1,000
322
-
-
1,322
Prepaid expenses and other current assets
1,764
3,146
-
-
4,910
Total current assets
11,555
11,741
(47,541 )
50,784
26,539
Property and equipment, net
2,205
6,642
-
-
8,847
Programming and other inventory
15,472
19,312
(193 )
(4)
-
34,591
Goodwill
1,622
25,874
29,791
(4a)
-
57,287
Intangible assets, net
5,954
26,803
18,707
(4)
-
51,464
Operating lease assets
1,084
2,749
-
-
3,833
Deferred income tax assets
1,241
617
-
-
1,858
Advance consideration for WBD acquisition
2,800
-
(2,800 )
(4)
-
-
Other assets
2,555
4,099
-
-
6,654
Total Assets
$ 44,488
$ 97,837
$ (2,036 )
$ 50,784
$ 191,073
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
$ 707
$ 1,110
$ (46 )
(4)
$ -
$ 1,771
Accrued expenses
1,730
6,066
(2,433 )
(4)
-
5,363
Participants’ share and royalties payable
2,613
3,483
-
-
6,096
Accrued programming and production costs
1,857
2,086
(824 )
(4)
-
3,119
Deferred revenues
1,354
1,592
-
-
2,946
Debt
662
1,493
-
48,314
(5a)
50,469
Other current liabilities
1,580
285
812
(4)
-
2,677
Total current liabilities
10,503
16,115
(2,491 )
48,314
72,441
Long-term debt
14,821
30,973
(19,538 )
(4)
4,984
(5a)
28,749
(2,459 )
(5d)
(32 )
(5c)
Participants’ share and royalties payable
1,404
2,378
-
-
3,782
Pension and postretirement benefit obligations
1,178
226
-
-
1,404
Deferred income tax liabilities
90
5,873
5,859
(9a)
-
11,822
Operating lease liabilities
1,112
3,226
-
-
4,338
Programming obligations
386
1,424
-
-
1,810
Other liabilities
2,245
3,915
140
(4)
-
6,300
Paramount stockholders’ equity:
Class A Common Stock
-
27
(27 )
(4f)
-
-
Class B Common Stock
1
-
4
(8d)
5
Additional paid-in-capital
13,316
55,865
(55,865 )
(4f)
-
60,218
46,902
(8d)
Treasury stock
(8,244 )
8,244
(4f)
-
-
Retained earnings (accumulated deficit)
(1,585 )
(14,428 )
40,302
(4f)
1
(5d)
(1,942 )
(25,874 )
(4a)
(24 )
(5c)
(334 )
(8b)
Accumulated other comprehensive loss
(27 )
(642 )
642
(4f)
-
(27 )
Total Paramount stockholders' equity
11,705
32,578
13,994
(23 )
58,254
Noncontrolling interests
1,044
1,129
-
-
2,173
Total Equity
12,749
33,707
13,994
(23 )
60,427
Total Liabilities and Equity
$ 44,488
$ 97,837
$ (2,036 )
$ 50,784
$ 191,073
The accompanying notes are an integral part of these unaudited pro
forma condensed combined financial statements.
-7-
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2026
(In millions, except per share amounts)
Pro Forma
Adjustments
Paramount
Skydance
Corp.
WBD
Adjusted (2)
WBD
Transaction
Accounting
Adjustments
Debt
Financing
Adjustments (5)
Pro Forma
Revenues
$ 7,347
$ 8,893
$ (111 )
(4)
$ -
$ 16,129
Costs and expenses:
Operating
4,855
4,893
(109 )
(4)
-
9,639
Selling, general
and administrative
1,411
2,052
(65 )
(4)
-
3,398
Netflix Termination
Fee
-
2,800
(2,800 )
(3a) (4)
-
-
Depreciation
and amortization
362
1,226
262
(4)
-
1,850
Restructuring,
transaction-related items, and other corporate matters
103
391
-
-
494
Total costs
and expenses
6,731
11,362
(2,712 )
-
15,381
Operating income
(loss)
616
(2,469 )
2,601
-
748
Interest expense,
net
(200 )
(559 )
282
(4)
(1,448 )
(5e)
(1,925 )
Loss on extinguishment
of debt
-
(27 )
-
-
(27 )
Other items,
net
(24 )
(60 )
-
-
(84 )
Earnings (loss)
before income taxes and equity in loss of investee companies
392
(3,115 )
2,883
(1,448 )
(1,288 )
(Provision for)
benefit from income taxes
(155 )
215
(15 )
(9c)
362
(9c)
407
Equity in loss
of investee companies, net of tax
(62 )
(6 )
-
-
(68 )
Net earnings
(loss) (Paramount and noncontrolling interests)
175
(2,906 )
2,868
(1,086 )
(949 )
Net earnings
attributable to noncontrolling interests
(7 )
(10 )
-
-
(17 )
Net earnings
(loss) from attributable to Paramount
$ 168
$ (2,916 )
$ 2,868
$ (1,086 )
$ (966 )
Net earnings
(loss) per common share attributable to Paramount:
Basic
$ .15
$ (.19 )
Diluted
$ .15
$ (.19 )
Weighted average number of common
shares outstanding:
Basic
1,110
3,913
(10)
5,023
Diluted
1,118
3,905
(10)
5,023
The accompanying notes are an integral part of
these unaudited pro forma condensed combined financial statements.
-8-
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,
2025
(In millions, except
per share amounts)
Pro Forma
Adjustments
Paramount
Skydance
Corp.
Adjusted(6)
WBD
Adjusted(2)
WBD
Transaction
Accounting
Adjustments
Debt
Financing
Adjustments(5)
Pro Forma
Revenues
$ 29,394
$ 37,296
$ (557 )
(4)
$ -
$ 66,133
Costs and expenses:
-
Operating
20,347
21,853
(521 )
(4)
-
41,679
Programming
charges
41
-
-
-
41
Selling, general
and administrative
6,136
8,284
(114 )
(4)
-
14,306
Depreciation
and amortization
1,469
5,684
212
(4)
-
7,365
Impairment charges
157
-
-
-
157
Restructuring,
transaction-related items, and other corporate matters
1,453
698
367
(4)
24
10
(5c)(5d)
2,552
Total costs
and expenses
29,603
36,519
(56 )
34
66,100
Gain
(loss) on dispositions
35
(39 )
-
-
(4 )
Operating income
(loss)
(174 )
738
(501 )
(34 )
29
Interest expense,
net
(760 )
(1,879 )
957
(4)
(4,837 )
(5e)
(6,519 )
Gain (loss)
from investments
(40 )
6
-
-
(34 )
Gain on extinguishment
of debt
-
2,945
-
11
(5d)
2,956
Other
items, net
(51 )
(147 )
-
-
(198 )
Earnings (loss)
before income taxes and equity in loss of investee companies
(1,025 )
1,663
456
(4,860 )
(3,766 )
Benefit from
(provision for) income taxes
319
(896 )
(168 )
(9c)
1,206
(9c)
461
Equity
in loss of investee companies, net of tax
(275 )
(18 )
-
-
(293 )
Net
earnings (loss) (Parent and noncontrolling interests)
(981 )
749
288
(3,654 )
(3,598 )
Net earnings
attributable to noncontrolling interests
(490 )
(24 )
-
-
(514 )
Net
loss attributable to redeemable noncontrolling interests
-
2
-
-
2
Net
earnings (loss) attributable to Parent
$ (1,471 )
$ 727
$ 288
$ (3,654 )
$ (4,110 )
Net loss per
common share attributable to Parent (basic and diluted):
Class B
common stockholders - Receiving Warrants
$ 4.86
Common stockholders
- Other
$ (1.41 )
Common stockholders
– All
$ (1.34 )
$ (.82 )
Weighted average
number of common shares outstanding (basic and diluted):
Class B
common stockholders - Receiving Warrants
472
(10)
472
Common stockholders
- Other
1,099
(6j)
3,441
(10)
4,540
Common stockholders
– All
1,099
(6j)
3,913
(10)
5,012
The accompanying notes are an integral part of
these unaudited pro forma condensed combined financial statements.
-9-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share
amounts)
1) BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed
consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the
information and note disclosures required by generally accepted accounting principles in the United States of America (“U.S GAAP”).
Pro forma financial information illustrates the effects of a particular transaction (or transactions) and is based on historically determined
amounts. The historical financial statements of Paramount, Skydance, and WBD have been adjusted in the accompanying unaudited pro forma
condensed combined financial statements to reflect transaction accounting adjustments that depict the estimated accounting effects of
the Transactions in accordance with U.S GAAP.
At the time Paramount Global and Skydance became
subsidiaries of Paramount Skydance Corporation, the Ellison Family controlled both Paramount Global and Skydance (and was the “Ultimate
Parent” of each), and as a result, the Skydance Transactions were accounted for as a transaction between entities under common
control. As a transaction between entities under common control, the net assets were combined at the Ultimate Parent’s basis, which
for Paramount Global was deemed to be the estimated fair value as of August 7, 2025, the date of the closing of the NAI Transaction,
which was the point at which the Ellison Family obtained control of Paramount Global. As a result, the net assets of Paramount Global
were recorded at their fair value as of this date. Since the net assets of Skydance were already at the Ultimate Parent’s basis,
no adjustment to the fair value of net assets was necessary, and Skydance was combined with Paramount Global’s net assets at the
Ultimate Parent’s basis as of this date. The pushdown of the Ultimate Parent’s basis resulted in a new basis of accounting
for Paramount Global’s net assets, which made the results of operations not comparable between the periods before and after the
Skydance Transactions and the NAI Transaction. Accordingly, Paramount’s financial results for the year ended December 31,
2025 are presented in two distinct periods. The periods prior to August 7, 2025 include only Paramount Global and are identified
as “Predecessor”, and the periods beginning on August 7, 2025 reflect Paramount Skydance Corporation and are identified
as “Successor”. See Note 6.
The unaudited pro forma Condensed Combined Balance
Sheet as of March 31, 2026 combines the historical consolidated balance sheet of Paramount as of March 31, 2026, and the historical
consolidated balance sheet of WBD as of March 31 2026, giving effect to the Acquisition as if it had occurred on March 31,
2026. These pro forma financial statements reflect assumptions and adjustments set forth in the accompanying explanatory notes.
The unaudited pro forma Condensed Combined Statement
of Operations for the three months ended March 31, 2026 combines the historical Consolidated Statements of Operations of Paramount
and WBD, as if the Acquisition occurred on January 1, 2025.
The unaudited pro forma Condensed Combined Statement
of Operations for the year ended December 31, 2025 combines the Adjusted Combined Statement of Operations for the year ended December 31,
2025 of Paramount and the historical Consolidated Statement of Operations for the year ended December 31, 2025 of WBD giving effect
to the Transactions as if they had occurred on January 1, 2025. The Adjusted Combined Statement of Operations of Paramount reflects
the combination of (i) the historical consolidated Statement of Operations of Paramount Global (Predecessor) for the period from
January 1, 2025 through August 6, 2025 (ii) the historical results of Skydance for the same period (iii) the historical
consolidated Statement of Operations of Paramount Skydance Corporation from August 7, 2025 to December 31, 2025 (Successor)
and (iv) the effects of the Skydance Transactions and NAI Transaction as if they had closed on January 1, 2025. As a result
of the pushdown of the Ultimate Parent’s basis, the net assets of Paramount Global were recorded at their fair value as of the
close of the Skydance Transactions and NAI Transaction. No adjustments to the August 7, 2025 to December 31, 2025 Successor
period are necessary, as the impacts from the Skydance Transactions and NAI Transaction are included in Paramount’s historical
results for this period.
In addition, the historical financial statements
of WBD and the historical Skydance results for the period from January 1, 2025 through August 6, 2025 have been adjusted to
align with the Company’s presentation in the unaudited pro forma Condensed Combined Financial Statements (See Notes 2 and 6).
The preparation of the unaudited pro forma condensed
combined financial statements incorporates various assumptions and estimates, including those related to the preliminary purchase price
allocation of WBD. The pro forma transaction accounting adjustments to adjust WBD’s net assets to preliminary estimates of fair
value are based on information available to the Company as of the date of this filing. The fair value estimates made herein may differ
materially based upon the finalization of appraisals and other valuation analyses, which is expected no later than one year from the
closing date of the Acquisition. These unaudited pro forma condensed combined financial statements are presented for illustrative purposes
only and do not necessarily reflect the operating results or financial position that would have occurred if the Transactions had been
consummated on the dates indicated, nor are they necessarily indicative of the results of operations or financial condition that may
be expected for any future period or date.
-10-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Accordingly, such information should not be relied
upon as an indicator of future performance, financial condition or liquidity. Additionally, the unaudited pro forma condensed combined
financial statements do not give effect to revenue synergies, operating efficiencies or cost savings that may be achieved with respect
to the combined company. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed
combined financial statements.
2) PRESENTATION OF HISTORICAL WARNER BROS. DISCOVERY
The historical financial information of WBD included
in the unaudited pro forma condensed combined financial statements reflects certain reclassifications to conform to the Company’s
presentation, which are presented in the tables below.
Balance Sheet Reclassifications
At March 31,
2026
Historical
WBD
Reclassification
Adjustments
WBD Adjusted
Assets
Current Assets:
Cash and cash equivalents
$ 3,264
$ -
$ 3,264
Receivables, net
5,009
-
5,009
Programming and other inventory
-
322
322
Prepaid expenses and other current assets
3,468
(322 )
3,146
Total current assets
11,741
-
11,741
Film and television content rights and games
19,312
(19,312 )
-
Property and equipment, net
6,642
-
6,642
Programming and other inventory
-
19,312
19,312
Goodwill
25,874
-
25,874
Intangible assets, net
26,803
-
26,803
Operating lease assets
-
2,749
2,749
Deferred income taxes
-
617
617
Other noncurrent assets
7,465
(7,465 )
-
Other assets
-
4,099
4,099
Total Assets
$ 97,837
$ -
$ 97,837
Liabilities and Equity
Current Liabilities:
Accounts payable
$ 1,110
$ -
$ 1,110
Accrued liabilities
11,920
(11,920 )
-
Accrued expenses
-
6,066
6,066
Participants' share and royalties payable
-
3,483
3,483
Accrued programming and production costs
-
2,086
2,086
Deferred revenues
1,592
-
1,592
Current portion of debt
1,493
(1,493 )
-
Debt
-
1,493
1,493
Other current liabilities
-
285
285
Total current liabilities
16,115
-
16,115
Noncurrent portion of debt
30,973
(30,973 )
-
Long-term debt
-
30,973
30,973
Participants’ share and royalties payable
-
2,378
2,378
Pension and postretirement benefit obligations
-
226
226
Deferred income taxes
5,873
(5,873 )
-
Deferred income tax liabilities, net
-
5,873
5,873
Operating lease liabilities
-
3,226
3,226
Programming obligations
-
1,424
1,424
Other noncurrent liabilities
11,169
(11,169 )
-
Other liabilities
-
3,915
3,915
Stockholders' equity:
Class A Common stock
27
-
27
Additional paid-in-capital
55,865
-
55,865
Treasury stock
(8,244 )
-
(8,244 )
Accumulated deficit
(14,428 )
-
(14,428 )
Accumulated other comprehensive loss
(642 )
-
(642 )
Total Parent stockholders’ equity
32,578
-
32,578
Noncontrolling interests
1,129
-
1,129
Total Equity
33,707
-
33,707
Total Liabilities and Equity
$ 97,837
$ -
$ 97,837
-11-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Statements of Operations Reclassifications
Three
Months Ended March 31, 2026
Historical
WBD
Reclassification
Adjustments
WBD Adjusted
Revenues
$ 8,893
$ -
$ 8,893
Costs and expenses:
Costs of revenues, excluding depreciation and amortization
4,643
(4,643 )
-
Operating
-
4,893
4,893
Selling, general and administrative
2,475
(423 )
2,052
Netflix Termination Fee
2,800
-
2,800
Depreciation and amortization
1,226
-
1,226
Restructuring and other charges
204
(204 )
-
Restructuring, transaction-related items, and other corporate
matters
-
391
391
Impairments and loss on dispositions
14
(14 )
-
Total costs and expenses
11,362
-
11,362
Operating loss
(2,469 )
-
(2,469 )
Interest expense, net
(581 )
22
(559 )
Loss on extinguishment of debt
(27 )
-
(27 )
Loss from equity investees, net
(5 )
5
-
Other (expense) income, net
(38 )
38
-
Other items, net
-
(60 )
(60 )
Loss before income taxes
(3,120 )
5
(3,115 )
Benefit from income taxes
-
215
215
Income tax benefit (expense)
214
(214 )
-
Equity in loss of investee companies,
net of tax
-
(6 )
(6 )
Net loss
(2,906 )
-
(2,906 )
Net income attributable to noncontrolling interests
(10 )
-
(10 )
Net loss available to Warner Bros.
Discovery, Inc.
$ (2,916 )
$ -
$ (2,916 )
-12-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Year Ended December 31, 2025
Historical WBD
Reclassification
Adjustments
WBD Adjusted
Revenues
$ 37,296
$ -
$ 37,296
Costs and expenses:
Costs of revenues, excluding depreciation and amortization
20,885
(20,885 )
-
Operating
-
21,853
21,853
Selling, general and administrative
9,418
(1,134 )
8,284
Depreciation and amortization
5,684
-
5,684
Restructuring and other charges
399
(399 )
-
Restructuring, transaction-related items, and other corporate matters
-
698
698
Impairments and loss on dispositions
172
(172 )
-
Total costs and expenses
36,558
(39 )
36,519
Loss on dispositions
(39 )
(39 )
Operating income
738
738
Interest expense, net
(2,085 )
206
(1,879 )
Gain from investment
-
6
6
Gain on extinguishment of debt
2,945
-
2,945
Loss from equity investees, net
(24 )
24
-
Other (expense) income, net
65
(65 )
-
Other items, net
-
(147 )
(147 )
Income before income taxes
1,639
24
1,663
Provision for income taxes
-
(896 )
(896 )
Income tax benefit (expense)
(890 )
890
-
Equity in loss of investee companies, net of tax
-
(18 )
(18 )
Net income
749
-
749
Net income attributable to noncontrolling interests
(24 )
-
(24 )
Net loss attributable to redeemable noncontrolling interests
2
-
2
Net income attributable to Warner Bros. Discovery, Inc.
$ 727
$ -
$ 727
-13-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
3) PRELIMINARY PURCHASE PRICE ALLOCATION
Estimated Total Aggregate Acquisition Consideration
Pursuant to the WBD Merger Agreement, on the
Acquisition closing date, all of WBD’s outstanding common shares will be converted into the right to receive $31.00 per share,
excluding any applicable Ticking Consideration as the Company assumes for the purposes of these pro forma financial statements that the
transaction will close prior to September 30, 2026.
(a) The preliminary purchase consideration is calculated as follows:
Preliminary Purchase Consideration Paid to WBD Shareholders (in millions except per share amounts)
Amount
Common stock outstanding (1)
2,511
Per share cash purchase price
$ 31
Cash paid to WBD’s shareholders
$ 77,837
Add: Cash paid related to pre-combination portion of replacement awards (2)
1,083
Add: Settlement of indebtedness (3)
15,000
Total cash consideration
93,920
Add: Netflix termination fee (4)
2,800
Add: Liabilities assumed related to pre-combination portion of replacement awards (2)
741
Less: Settlement of pre-existing relationships (5)
(184 )
Total preliminary purchase consideration
$ 97,277
-14-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(1) The amount of estimated shares of WBD Common Stock is based on 2,507,136,702
shares of WBD Common Stock issued and outstanding as of April 23, 2026, per WBD’s
Quarterly Report on Form 10-Q for the three months ended March 31, 2026, as filed
with the SEC on May 6, 2026, adjusted for 3,737,162 WBD PRSUs that were vested, but
not distributed at that date.
(2) Reflects $1.1 billion in estimated cash payments to holders of vested
WBD stock options, RSUs, and PRSUs, and $741 million in estimated liabilities related to
holders of unvested WBD stock options, RSUs, and PRSUs that will be converted into the contingent
right to receive cash-based awards of Paramount, with $601 million recorded within “Other
current liabilities” and $140 million within “Other liabilities” on the
unaudited pro forma Condensed Combined Balance Sheet.
(3) WBD’s existing $15.0 billion bridge facility will be replaced
or refinanced, if not refinanced by WBD prior to closing, subject to the related cooperation
requirements in the WBD Merger Agreement. The adjustment to remove the $15.0 billion bridge
facility in the unaudited pro forma Condensed Combined Balance Sheet is reflected net of
deferred issuance costs of $117 million.
(4) The $2.8 billion termination fee paid to Netflix by Paramount, on
behalf of WBD, in connection with the execution of the WBD Merger Agreement has been treated
as purchase consideration. Accordingly, pro forma adjustments have been recorded to the unaudited
pro forma Condensed Combined Balance Sheet to (i) eliminate Paramount’s prepaid
asset related to the termination fee and (ii) remove WBD’s accrued liability associated
with the obligation. In addition, an adjustment has been recorded to the unaudited pro forma
Condensed Combined Statement of Operations for the three months ended March 31, 2026
to eliminate the expense recognized by WBD in its historical financial statements related
to the termination fee.
(5) Settlement of pre-existing relationships consists of Paramount’s
net payable to WBD of $184 million, comprised of receivables due from WBD of approximately
$277 million and payables due to WBD and accrued programming liabilities related to WBD,
of $36 million and $425 million, respectively.
(b) The accounting for the Acquisition, including the preliminary purchase
consideration, is based on provisional amounts, and the associated purchase accounting is
not final. The preliminary allocation of the purchase price to the acquired assets and assumed
liabilities was based upon a preliminary estimate of fair values, which leveraged publicly
available benchmarking information as well as a variety of other assumptions Paramount believes
are reasonable under the circumstances. Actual results may differ materially from the assumptions
within these unaudited pro forma condensed combined financial information.
The following table summarizes the preliminary purchase
price allocation as of the date of the Acquisition, including the effects of intercompany eliminations which are reflected in Note 4:
Preliminary Purchase Price Allocation
Estimated Fair Value
Cash and cash equivalents
$ 3,264
Receivables, net
4,759
Programming and other inventory
19,441
Prepaid expenses and other current assets
3,146
Property and equipment, net
6,642
Goodwill (1)
55,665
Intangible assets, net
45,510
Operating lease assets
2,749
Deferred income taxes
617
Other assets
4,099
Total assets acquired
$ 145,892
Accounts payable
$ 1,100
Accrued expenses
3,266
Participants' share and royalties payable
5,861
Accrued programming and production costs
1,687
Deferred revenues
1,592
Debt
12,928
Deferred income taxes
11,765
Operating lease liabilities
3,226
Programming obligations
1,424
Pension and postretirement benefit obligation
226
Other liabilities
4,411
Total liabilities assumed
$ 47,486
Noncontrolling interests
1,129
Total preliminary purchase consideration
$ 97,277
(1) Goodwill
represents the difference between the total preliminary purchase consideration and the estimated fair value of WBD’s net assets
based on the preliminary fair value estimates assumed herein.
-15-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
4) WARNER BROS. DISCOVERY PRO FORMA ADJUSTMENTS
Balance Sheet Pro Forma Adjustments
At March 31, 2026
WBD Transaction Accounting Adjustments
Transaction Accounting
Adjustments
Intercompany
Transactions(7)
Total
Assets
Current Assets:
Cash and cash equivalents
$ (47,014 )
3a, 8d
$ -
$ (47,014 )
Receivables, net
(277 )
3a(5)
(250 )
(527 )
Total current assets
(47,291 )
(250 )
(47,541 )
Programming and other inventory
-
(193 )
(193 )
Goodwill
29,495
4a
296
29,791
Intangible assets, net
18,707
4b
-
18,707
Advance consideration for WBD acquisition
(2,800 )
3a(4)
-
(2,800 )
Deferred income tax assets
-
-
-
Total Assets
$ (1,889 )
$ (147 )
$ (2,036 )
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
$ (36 )
3a(5)
$ (10 )
$ (46 )
Accrued expenses
(2,433 )
3a(4), 8a
(2,433 )
Accrued programming and production costs
(425 )
3a(5)
(399 )
(824 )
Other current liabilities
601
3a(2)
211
812
Total current liabilities
(2,293 )
(198 )
(2,491 )
Long-term debt
(19,538 )
4c
-
(19,538 )
Deferred income tax liabilities
5,808
9a
51 9a
5,859
Other liabilities
140
3a(2)
140
Stockholders' equity:
Class A common stock
(27 )
4f
-
(27 )
Class B common stock
4
8d
-
4
Additional paid-in-capital
(8,963 )
4f
-
(8,963 )
Treasury stock
8,244
4f
-
8,244
Accumulated deficit
14,094
4f
-
14,094
Accumulated other comprehensive loss
642
4f
-
642
Total stockholders' equity
13,994
-
13,994
Total Equity
13,994
-
13,994
Total Liabilities and Equity
$ (1,889 )
$ (147 )
$ (2,036 )
-16-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Statements of Operations Pro Forma Adjustments
Three Months Ended March 31, 2026
WBD Transaction Accounting Adjustments
Transaction
Accounting
Adjustments
Intercompany
Transactions (7)
Total
Revenues
$ -
$ (111 )
$ (111 )
Costs and expenses:
Operating
-
(109 )
(109 )
Selling, general and administrative
(48 )
8c
(17 )
(65 )
Netflix Termination Fee
(2,800 )
3a(4)
-
(2,800 )
Depreciation and amortization
262
4d
-
262
Restructuring, transaction-related items, and other corporate matters
-
-
-
Total costs and expenses
(2,586 )
(126 )
(2,712 )
Operating income
2,586
15
2,601
Interest expense, net
282
5e
-
282
Earnings (loss) before income taxes and equity in loss of investee companies
2,868
15
2,883
Provision for income taxes
(12 )
9c
(3 ) 9c
(15 )
Net earnings (loss)
2,856
12
2,868
Net earnings (loss) attributable to Parent
$ 2,856
$ 12
$ 2,868
Year Ended December 31, 2025
WBD Transaction Accounting Adjustments
Transaction
Accounting
Adjustments
Intercompany
Transactions (7)
Total
Revenues
$ -
$ (557 )
$ (557 )
Costs and expenses:
Operating
-
(521 )
(521 )
Selling, general and administrative
(43 )
8c
(71 )
(114 )
Depreciation and amortization
212
4d
-
212
Restructuring, transaction-related items, and other corporate matters
367
8a
-
367
Total costs and expenses
536
(592 )
(56 )
Operating (loss)
(536 )
35
(501 )
Interest expense, net
969
5e
(12 )
957
Earnings (loss) before income taxes and equity in loss of investee companies
433
23
456
Provision for income taxes
(162 )
9c
(6 ) 9c
(168 )
Net income (loss)
271
17
288
Net income (loss) attributable to Parent
$ 271
$ 17
$ 288
(4a) Reflects the following adjustments related to the Acquisition
and elimination of intercompany transactions:
Pro forma adjustment
Reversal of historical WBD goodwill
$ (25,874 )
(2)
Preliminary purchase consideration
97,277
(3a)
Reverse WBD historical liability for Netflix Termination Fee
(2,800 )
(3a(4))
Settlement of WBD bridge facility
(14,883 )
(5b)
Effect of preliminary fair value adjustment to acquired intangible assets
(18,707 )
(4b)
Effect of preliminary fair value adjustment to assumed debt
(4,655 )
(4c)
Tax effects of Acquisition
5,841
(9a), (4e)
Reversal of historical WBD equity, net of historical goodwill reversal
(6,704 )
(4f)
Transaction accounting adjustments
29,495
Elimination of intercompany transactions
296
(7)
Total pro forma adjustment
$ 29,791
-17-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(4b) The pro forma adjustment reflects the estimated incremental
fair value of WBD’s intangible assets of $18.7 billion. Estimated amortization of the intangible assets is recognized on a straight-line
basis over their respective estimated useful lives. The estimated amortization period, estimated fair values, and related pro forma adjustments
for the incremental amortization expense is presented in the table below.
Estimated straight-line
amortization period
Fair Value
Three Months Ended
March 31, 2026
Year Ended December 31,
2025
Trade names
13-20 years
$ 18,470
$ 234
$ 930
Franchises
20 years
9,400
118
470
Character rights
20 years
720
9
36
Affiliate relationships
7 years
12,100
406
1,625
Technology
3 years
275
23
92
Subscriber relationships
3 years
4,100
342
1,367
Advertisers (relationship & backlog)
1.5 years
445
75
297
Total
45,510
1,207
4,817
Less: historical amortization
945
4,605
Pro forma adjustment
$ 262
$ 212
-18-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
The estimated fair value of acquired
intangibles was determined as outlined below:
· The
estimated value of franchises was determined using the multi-period excess earnings method.
· The
estimated value of affiliate relationships was determined using the multi-period excess earnings
method.
· The
estimated value of developed technology was determined using the cost approach.
· The
estimated value of character rights was determined using the multi-period excess earnings
method.
· The
estimated value of trade names was determined using the relief from royalty method.
· The
estimated value of advertiser relationships was determined using the with-and-without method.
· The
estimated value of subscriber relationships was determined using the cost approach.
(4c) Adjustment includes the fair market value step down of outstanding
debt of $4.7 billion and the settlement of WBD’s existing $15.0 billion bridge facility net of $117 million in remaining deferred
issuance costs related to the bridge facility, which is described further in Note 5.
For all other
assets and liabilities and noncontrolling interests other than those adjusted in (4b) and (4c) and the related tax effects of the Acquisition
discussed in Note 9, the book value was deemed to approximate fair value, and therefore no fair value adjustments were recorded.
(4d) The pro forma adjustments to "Depreciation and amortization"
on the unaudited pro forma Condensed Combined Statements of Operations of $262 million and $212 million for the three months ended March 31,
2026 and year ended December 31, 2025, respectively, reflect the net incremental amortization expense related to the intangible
assets. A 10% change in the valuation of finite-lived intangible assets would result in a corresponding increase or decrease in expense
of approximately $121 million and $482 million for the three months ended March 31, 2026 and year ended December 31, 2025,
respectively, based on the estimated useful lives described above.
(4e) The estimated tax impacts of the pro forma adjustments to
adjust WBD’s net assets to preliminary estimates of fair value in the unaudited pro forma Condensed Combined Balance Sheet and
the related adjustments in the unaudited pro forma Condensed Combined Statements of Operations are reflected using the estimated statutory
tax rates of the combined company. See Note 9.
(4f) The pro forma adjustments reflect the removal of WBD’s
historical equity balances, net of the $25.9 billion reversal of historical WBD goodwill, including common stock, additional paid-in
capital, retained earnings, and other components of equity. This reflects the adjustments to remeasure WBD’s net assets at fair
value as of the acquisition date.
5) DEBT FINANCING RELATED ADJUSTMENTS
The unaudited pro forma condensed combined financial
information reflects financing assumptions related to the Acquisition, including the issuance of debt, repayment and refinancing of existing
indebtedness. Specifically, these unaudited pro forma condensed combined financial statements assume (i) the issuance of the $2.5
billion Term A-1 Loans and $2.5 billion Term A-2 Loans, (ii) the issuance of the $49.0 billion 364 Day senior secured bridge term
loan facility used to fund the acquisition, (iii) the issuance of $12.8 billion of New PSKY Notes in exchange for $12.8 billion
of Existing WBD Notes (assuming 100% participation in the Exchange Offers), (iv) that $2.4 billion of Existing WBD Notes are tendered
for cash (assuming 100% participation in the Tender Offers) and (v) the settlement of WBD’s existing $15.0 billion bridge
facility. The pro forma adjustments are based on financing commitments that are in place as of the date of this filing and do not reflect
the impact of any future refinancings or changes in capital structure that may occur prior to or following the consummation of the Acquisition.
While not reflected in the pro forma financial statements, future refinancings are expected to result in a lower interest rate.
-19-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Balance Sheet Adjustments:
Debt
Issuance (5a)
Repayment of
WBD Bridge
Financing (5b)
Exchange
Offer (5c)
Tender
Offer (5d)
Pro Forma
Adjustment
Bridge Commitments
$ 48,314
$
48,314
Short-term debt
48,314
New 3-year Term A-1 Loans
2,492
2,492
New 5-year Term A-2 Loans
2,492
2,492
New Second Lien Secured Exchange Notes
10,852
10,852
Existing WBD Long-term Debt
(14,883 )
(10,884 )
(2,459 )
(28,226)
Long-term debt
(12,390)
Total debt
$
35,924
(5a) The adjustments reflect the impact of the issuance of the
$2.5 billion Term A-1 Loans and $2.5 billion Term A-2 Loans and $49.0 billion 364-day senior secured bridge term loan facility used to
fund the acquisition, net of debt issuance cost of $686 million. $53.3 billion of cash was reflected on the unaudited pro forma Condensed
Combined Balance Sheet in connection with the issuance of debt.
(5b) The adjustment reflects a transaction accounting adjustment
related to the settlement of WBD’s existing $15.0 billion bridge facility net of $117 million in remaining deferred issuance costs
related to the bridge loan. The bridge loan will be replaced or refinanced, if not refinanced by WBD prior to closing, subject to the
related cooperation requirements in the WBD Merger Agreement. Refer to Note 3.
(5c) The adjustments reflect the impact of the Exchange Offers,
specifically the $32 million of payments to bondholders, in connection with the Exchange Offers, assuming that 100% of the Existing WBD
Notes subject to the Exchange Offers will be exchanged in full in the applicable Exchange Offer. The Company expects to account for the
Exchange Offers as debt modifications in accordance with ASC 470, Debt, because all key terms of the New PSKY Notes are expected
to be consistent with the current terms. Accordingly, the payments to the holders are reflected as a reduction in the carrying value.
The carrying value of the Existing WBD Notes and the fair value of the New PSKY Notes has been assumed to be equal to the estimated fair
value of the Existing WBD Notes assumed in the Acquisition. Estimated third-party expenses of $24 million are included within “Restructuring, transaction-related items, and other corporate matters.” Further, the fair value of the New PSKY Notes are expected to be similar to the fair value of the debt assumed in the transaction.
(5d) The adjustments reflect the impact of the Tender Offers, specifically
the purchase of (i) the DCL Issuer’s $1.2 billion aggregate principal amount of 3.950% Senior Notes due 2028 with a carrying
amount of $1.252 billion and (ii) the DGH Issuer’s $1.2 billion aggregate principal amount of 3.755% Senior Notes due 2027
with a carrying amount of $1.207 billion, assuming that 100% of the Existing WBD Notes subject to the Tender Offers will be tendered
in the applicable Tender Offer. The estimated cash consideration for the Existing WBD Notes subject to the Tender Offers of $2.4 billion,
was determined based on a fixed-spread pricing formula linked to the yield on the applicable Reference Treasury Security determined as
of March 31, 2026. The estimated gain on extinguishment of debt of $11 million, is reflected in the unaudited pro forma Condensed
Combined Statement of Operations for the year ended December 31, 2025. Estimated payments to bondholders and third-party expenses
of $10 million are included within “Restructuring, transaction-related items, and other corporate matters.”
-20-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO
FORMA
CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Tabular dollars in millions,
except per share amounts)
Statements
of Operations Adjustments
(5e) The adjustments
reflect the following increases (decreases) to Interest expense, net:
Three
Months Ended
March 31, 2026
Year
Ended
December 31, 2025
Estimated
interest expense on new financing (1)
Financing adjustments
$ 1,276
$ 4,132
Elimination
of historical interest expense on WBD bridge facility (2)
Transaction accounting adjustments
(345 )
(647 )
Adjustment of
historical interest expense on debt subject to fair market value step down
Transaction accounting adjustments
89
(161 )
Elimination
of historical interest expense on WBD loans settled through the Tender Offers (3)
Transaction accounting adjustments
(26 )
(161 )
Amortization
of deferred debt issuance costs (4)
Financing adjustments
172
705
1,166
3,868
Total
financing adjustments
$ 1,448
$ 4,837
Total
transaction accounting adjustments
$ (282 )
$ (969 )
(1) Represents the additional interest expense in connection with the
Term A-1 Loans and Term A-2 Loans and in connection with the 364-day senior secured bridge
term loan facility, net of $172 million and $705 million of amortization of deferred financing
charges during the three months ended March 31, 2026 and year ended December 31,
2025, respectively.
The interest rates on the Term A-1
Loans and Term A-2 Loans and 364-day senior secured bridge term loan facility are calculated using the SOFR adjusted for a margin and
are initially estimated to be approximately 5.94% and 6.98% respectively.
A sensitivity analysis on interest
expense with respect to the variable rate Term A-1 Loans and Term A-2 Loans and 364-day senior secured bridge term loan facility for
the three months ended March 31, 2026 and the year ended December 31, 2025, has been performed to assess the effect of a change
of 0.125% of the hypothetical interest rate. A change in the interest rate of 0.125% would result in a change in estimated interest expense
of $17 million and $68 million for the three months ended March 31, 2026 and year ended December 31, 2025 respectively. A change
in interest rate of 1% would result in a change in estimated interest expense of $132 million and $541 million for the three months ended
March 31, 2026 and year ended December 31, 2025, respectively.
(2) Represents the elimination of historical interest expense as a result
of the settlement of WBD’s existing $15.0 billion bridge facility.
(3) Represents elimination of historical interest expense related to
historical WBD debt repurchased as a result of the Tender Offers, assuming that 100% the
Existing WBD Notes subject to the Tender Offers will be tendered in the applicable Tender
Offer. Assumes the New PSKY Notes exchanged for Existing WBD Notes in the Exchange Offers
bear the same rates of interest as the Existing WBD Notes for which they are exchanged.
Subject to the terms of the Exchange Offers, certain series of Existing WBD Notes may be
offered New PSKY Notes with interest rates that are higher than the interest rates that currently
apply to such Existing WBD Notes. For purposes of these pro forma financial statements,
the Company has assumed 100% participation in the Exchange Offers and Tender Offers; however,
any Existing WBD Notes not exchanged or tendered will continue to bear interest at the rates
currently applicable to the Existing WBD Notes.
(4) Represents amortization of issuance costs associated with the new
debt issued by Paramount.
-21-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
6) PRESENTATION OF ADJUSTED PARAMOUNT
The Adjusted Combined Statement of Operations
of Paramount reflects the combination of (i) the historical consolidated Statement of Operations of Paramount Global (Predecessor)
for the period from January 1, 2025 through August 6, 2025 (ii) the historical results of Skydance for the same period
(iii) the historical consolidated Statement of Operations of Paramount Skydance Corporation from August 7, 2025 to December 31,
2025 (Successor) and (iv) the effects of the Skydance Transactions and NAI Transaction as if they had closed on January 1,
2025. As a result of the pushdown of the Ultimate Parent’s basis described in Note 1, the net assets of Paramount Global were recorded
at their fair value as of the close of the Skydance Transactions and NAI Transaction. No adjustments to the August 7, 2025 to December 31,
2025 Successor period are necessary, as the impacts from the Skydance Transactions and NAI Transaction are included in Paramount’s
historical results for this period.
The historical financial information of Skydance
included in the unaudited pro forma condensed combined financial statements reflects certain reclassifications to conform to the Company’s
presentation.
Year ended
December 31, 2025
Historical
Predecessor
Successor
Paramount
Global (1)
Paramount
Skydance
Corp. (2)
Adjusted
Skydance
Media,
LLC (3)
Skydance
Transaction
Accounting
Adjustments
(1)
Adjustments
to Paramount
Global
Historical
Basis (1)
Paramount
Skydance
Corp.
Adjusted
Revenue
$
16,622
$
12,269
$
554
$
(51
)
6a
$
-
$
29,394
Costs and expenses:
-
Operating
11,287
8,408
724
(72
)
6b
-
6i
20,347
Programming charges
-
41
-
-
-
41
Selling, general and administrative
3,526
2,594
16
-
-
6,136
Depreciation and amortization
204
590
1
-
674
6e
1,469
Impairment charges
157
-
-
-
-
157
Restructuring, transaction-related items,
and other corporate matters
454
731
268
-
-
1,453
Total costs and expenses
15,628
12,364
1,009
(72
)
674
29,603
Gain on dispositions
35
-
-
-
-
35
Operating income (loss)
1,029
(95
)
(455
)
21
(674
)
(174
)
Interest expense, net
(433
)
(302
)
(8
)
14
6c
(31
)
6f
(760
)
Loss from investments
-
(40
)
-
-
-
(40
)
Other items, net
(92
)
(39
)
-
-
80
6g
(51
)
Earnings (loss) before income taxes and equity in loss of investee
companies
504
(476
)
(463
)
35
(625
)
(1,025
)
Benefit from income taxes
79
40
-
47
6d
153
6h
319
Equity in loss of investee companies, net
of tax
(171
)
(104
)
-
-
-
(275
)
Net earnings (loss)
412
(540
)
(463
)
82
(472
)
(981
)
Net earnings attributable to noncontrolling
interests
(447
)
(46
)
3
-
-
(490
)
Net loss attributable to Parent
$
(35
)
$
(586
)
$
(460
)
$
82
$
(472
)
$
(1,471
)
(1) Represents the historical results of
Paramount Global and pro forma adjustments for the period from January 1, 2025 to August 6,
2025.
(2) Represents the historical results for the period from August 7, 2025 through December 31,
2025.
(3) Represents the historical results of
Skydance for the period from January 1, 2025 to August 6, 2025, derived from the
historical books and records of Skydance.
-22-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(6a) The pro forma adjustment
to “Revenues” reflects a reduction of $51 million primarily for Skydance’s
co-participant share of revenues for feature film and television productions with Paramount
that would have been eliminated upon consolidation if the Skydance Transactions had occurred
on January 1, 2025.
(6b) “Operating”
expenses has been adjusted for the impact of intercompany transactions between Paramount
and Skydance, including elimination of Paramount’s participation expenses related to
Skydance’s proportionate share of revenue for co-production titles, recorded on a gross
basis by Paramount and adjustments to the historical amortization of production costs that
would have been recorded for co-production titles had Paramount and Skydance been a combined
entity during the Predecessor period.
(6c) The transaction accounting
adjustment to “Interest expense, net” reflects the impact of the repayment of
outstanding borrowings under Skydance’s revolving credit facility in connection with
the closing of the Skydance Transactions. Interest expense would have decreased by $14 million
if the Skydance Transactions and NAI Transaction had occurred on January 1, 2025.
(6d) The transaction accounting
adjustment to “Benefit from income taxes” reflects an increase to the tax benefit
of $47 million for the inclusion of Skydance in Paramount’s consolidated income tax
calculation for the Predecessor period.
(6e) The pro forma adjustment
to “Depreciation and amortization” reflects the impact from the changes to Paramount
Global’s historical basis applied as if the Skydance Transactions and NAI Transaction
had occurred on January 1, 2025. The adjustment of $674 million principally reflects
net incremental amortization expense related to identified finite-lived intangible assets.
(6f) The pro forma adjustment
of $31 million to “Interest expense, net” reflects the amortization of the fair
value adjustment to debt, partially offset by the removal of the amortization of debt issuance
costs as the unamortized debt issuance costs relating to Paramount Global’s debt were
reversed in connection with recording the debt at fair value.
(6g) The pro forma adjustment
of $80 million to “Other items, net” reflects the reversal of the amortization
of net actuarial losses for Paramount Global’s pension and other postretirement benefit
plans. Paramount Global’s historical equity accounts were reversed in connection with
the pushdown of the Ultimate Parent’s basis.
(6h) The pro forma adjustment
of $153 million to “Benefit from income taxes” for the year ended December 31,
2025 reflects the tax impacts of the pro forma adjustments to Paramount Global’s basis
as if the Skydance Transactions and NAI Transaction had occurred on January 1, 2025.
(6i) The unaudited pro forma
Condensed Combined Statements of Operations do not include any pro forma adjustments to “Operating
expenses” as a result of recording Paramount Global’s programming assets at their
estimated fair values. It is not practicable to estimate the impact of the fair value adjustments
on historical content amortization expense because Paramount’s content portfolio at
any point in time is comprised of numerous assets with a different mix of useful lives and
amortization patterns that limit the comparability of the content portfolio as of the closing
of the Skydance Transactions to the content portfolio in prior historical periods.
(6j) The Paramount
Adjusted basic and diluted weighted average number of common shares outstanding of 1,099
million for the year ended December 31, 2025 is calculated based on a weighted average
of the number of days in each of the Predecessor and Successor periods, as further detailed
in the table below. Since the unaudited pro forma condensed combined Statement of Operations
gives effect to the Skydance Transactions as if they occurred on January 1, 2025, the
weighted average number of common shares outstanding for the Predecessor period has been
adjusted to reflect the actual common shares outstanding of 1,096 million as of August 7,
2025 following the closing of the Skydance Transactions.
Weighted
Average Shares Outstanding
Days
in Period
Predecessor Period January 1, 2025-August 6, 2025
1,096
218
Successor Period August 7, 2025 – December 31, 2025
1,102
147
Paramount, Adjusted January 1, 2025 – December 31, 2025
1,099
365
-23-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
7) PARAMOUNT-WBD INTERCOMPANY TRANSACTIONS
Transactions between Paramount and WBD primarily
include content licensing, co-production, and advertising arrangements. The unaudited Pro Forma Condensed Combined Statements of Operations
include estimated adjustments to eliminate transactions between Paramount and WBD for content licensing, co-production, and advertising
arrangements, consisting of revenues and expenses recognized as part of the intercompany transactions and adjustments to the amortization
expense for the profit in capitalized content licenses. The unaudited Pro Forma Condensed Combined Balance Sheet includes adjustments
to eliminate “Accounts Receivable” and “Accounts Payable” between Paramount and WBD for content licensing and
advertising arrangements, the elimination of intercompany profit on content licensing arrangements recorded within “Programming
and other inventory”, and the elimination of “Accrued programming and production costs” related to programming obligations
between Paramount and WBD. “Goodwill” was also adjusted to eliminate intercompany profit on content licensing arrangements
to reflect the impact of the elimination on retained earnings that is adjusted against goodwill as part of purchase accounting. Prior
to recording the elimination adjustments described above, an adjustment was recorded to reinstate $211 million of “Accounts Receivable”
offset by a corresponding liability within “Other current liabilities” that relates to WBD receivables from Paramount that
would be repurchased as a result of the Acquisition under the terms of WBD’s securitization program.
8) OTHER TRANSACTION ACCOUNTING ADJUSTMENTS
Transaction-Related Items
The unaudited pro forma condensed combined financial
statements include adjustments for transaction-related costs expected to be incurred by Paramount from April 1, 2026 through the
closing date of the Acquisition. These costs and the corresponding adjustments to “Accrued expenses”
on the unaudited pro forma Condensed Combined Balance Sheet and “Restructuring, transaction-related items, and other corporate
matters” on the unaudited pro forma Condensed Combined Statement of Operations for the year ended December 31, 2025 are described
in the table below.
Accrued
Expenses
Restructuring,
Transaction-Related Items, and Other Corporate Matters
Transaction-related costs
$ 367
$ 367
8a
Total adjustment
$ 367
$ 367
-24-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(8a) Reflects estimated transaction-related
costs of $367 million anticipated to be incurred by Paramount between April 2026 to
actual transaction close, consisting mainly of banking, legal, advisory and other professional
fees in connection with the Acquisition. The estimated transaction-related costs are not
anticipated to affect the unaudited pro forma Condensed Combined Statements of Operations
beyond twelve months after the closing date of the Acquisition
(8b) The reduction of $334
million to ”Retained earnings (accumulated deficit)” on the unaudited pro forma
Condensed Combined Balance Sheet reflects the impact from the transaction-related costs adjustment
to “Accrued Expenses” presented in the table above, which total $367 million,
net of the related tax benefit, where applicable, of $33 million (see Note 9).
Issuance of
Shares, Financing Arrangements, and Related Activity
In connection with the Acquisition, Paramount
will undertake a series of equity issuances and related financing arrangements to facilitate the consummation of the Acquisition. These
activities include the cancellation of all issued and outstanding WBD Common Stock at the Effective Time and their conversion into the
right to receive the applicable cash merger consideration. No shares of Paramount common stock will be issued to former WBD shareholders.
Concurrently with the execution of the WBD Merger
Agreement, Paramount entered into the Subscription Agreements pursuant to which the Equity Investors committed to purchase shares of
Paramount Class B Common Stock in a PIPE financing. Pursuant to the Equity Syndication the Equity Investors have assigned their
subscription rights to a group of institutional investors (each an Equity Syndication Party), comprising affiliates of the Equity Investors,
The Public Investment Fund, L'Imad 1st SPV 2 Exempt RSC LTD (an investment vehicle of L'Imad Holding, an Abu Dhabi sovereign wealth fund),
QIA TMT Holding LLC (an investment vehicle of the Qatar Investment Authority), and LionTree Investment Fund, L.P. The aggregate allocations
cover the full amount committed by the Equity Investors. At closing, the Company will issue to each Equity Syndication Party a number
of newly issued shares of nonvoting Paramount Class B Common Stock (or securities convertible into shares) equal to its allocated
amount divided by the Syndication Purchase Price for aggregate gross proceeds sufficient, together with other sources of financing, to
fund the Merger Consideration and transaction-related payments.
Each holder of Paramount Class B Common
Stock (excluding any Equity Investor or affiliate thereof) as of a record date to be determined, will receive, without payment of any
consideration, one 10-year Warrant for each share held, exercisable at any initial exercise price per share equal to the
Syndication Purchase Price and subject to customary anti-dilution and fundamental change make-whole adjustments. Beginning on the third
anniversary of issuance, Paramount may call the Warrants if the closing price of Paramount Class B Common Stock equals or exceeds
$30.00 for at least 20 trading days in any 30 consecutive trading day period. As a result of the issuance of
the Warrants, existing Paramount RSUs will be “made-whole” for the dilutive impact of the issuance of the Warrants pursuant
to a pre-existing anti-dilution provision in the Paramount equity plan. The pro forma financial statements do not include an adjustment
for the “make-whole” provision, as its terms are not yet known.
In addition, at the effective time of the Acquisition,
outstanding equity-based awards of WBD will be treated in accordance with the WBD Merger Agreement. Vested equity awards will be cancelled
and settled in cash based on the applicable Merger Consideration, while unvested equity awards will be converted into a contingent right
to receive cash-based awards of Paramount, as applicable, generally subject to the same vesting terms and conditions as that were in
effect immediately prior to the Effective Time, provided the WBD Notional Units outstanding as part of the WBD Non-Employee Directors
Deferral Plan and WBD Supplemental Retirement Plan (collectively the “Replaced WBD Equity”) will receive Paramount Class B
Common Stock based on the ratio of (i) Merger Consideration divided by (ii) 15 day VWAP of Paramount Class B Common Stock,
where the 15 days period will end 3 trading days prior to Closing Date.
The pro forma financial information reflects
the cancellation of WBD Common Stock upon consummation of the Acquisition; the issuance of Paramount Class B Common Stock pursuant
to the PIPE financing; and the settlement, conversion, or replacement of WBD equity awards at the Effective Time. No pro forma adjustment
has been reflected for the issuance of equity-based awards that are subject to future service requirements, except to the extent such
awards are reflected as compensation cost in accordance with applicable accounting guidance.
No pro forma adjustment has been recorded for
warrants to existing shareholders, as the Company’s accumulated deficit position results in no net impact to additional paid-in
capital. Accordingly, the effect of these warrants is not reflected in the unaudited pro forma condensed combined financial information.
-25-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Three
Months Ended March 31, 2026
Selling,
General and Administrative
Stock-based
compensation expense
(48 )
8c
Total adjustment
$ (48 )
Year
Ended December 31, 2025
Selling,
General and Administrative
Stock-based
compensation expense
(43 )
8c
Total adjustment
$ (43 )
(8c) Reflects the new compensation
arrangements executed with employees who held unvested options that were in the money, unvested
RSUs, and unvested performance restricted stock units in connection with the Acquisition,
resulting in a $48 million and $43 million decrease in compensation expense for the three
months ended March 31, 2026, and year ended December 31, 2025, respectively.
(8d) In connection with the
Acquisition, the pro forma adjustment reflects a net increase in cash of $46.9 billion, representing
$46.95 billion of proceeds from the PIPE financing, partially offset by $47 million of issuance
costs. The transaction results in the issuance of 3.9 billion shares of Paramount Class B
Common Stock at $.001 par value, with the excess proceeds recorded as additional paid-in
capital assuming a Syndication Purchase Price of $12.00 per share.
9) INCOME TAX
The tables below reflect the impacts on the unaudited
pro forma condensed combined financial statements from the inclusion of WBD in Paramount’s calculation of income taxes and the
tax impacts of the pro forma adjustments described in Note 4. An estimated tax rate of 25% was applied in determining the figures presented
below.
Balance Sheet Adjustments
At
March 31, 2026
Transaction
Accounting Adjustments
Debt
Financing Adjustments
Deferred income
tax assets
n/a
n/a
Deferred income tax liabilities
$
5,859
9a
$
-
Goodwill
$
5,892
9b
$
-
Statements of Operations Adjustments
Three
Months Ended March 31, 2026
Year Ended
December 31, 2025
Transaction
Accounting
Adjustments
Debt
Financing
Adjustments
Transaction
Accounting
Adjustments
Debt
Financing
Adjustments
(Provision for) benefit from
income taxes
$
(15
)
9c
$
362
9c
$
(168
)
9c
$
1,206
9c
(9a) The adjustment to “Deferred
income tax liabilities” as of March 31, 2026 includes an increase of $5,841 million
for the deferred income tax impact of the pro forma adjustments described in Note 4 to reflect
WBD’s assets and liabilities at fair value, an increase of $51 million for the
deferred tax impact of the elimination of transactions between Paramount and WBD as described
in Note 7, and a decrease of $33 million for the deferred tax impact of the transaction- related costs adjustment as described in Note 8.
(9b) The adjustment to “Goodwill”
reflects the offsetting impact to the adjustments to “Deferred income tax liabilities”
to establish the deferred income taxes.
(9c) The adjustments to “(Provision
for) Benefit from income taxes” for the three months ended March 31, 2026 and
year ended December 31, 2025 reflect tax benefits of $347 million and $1,038 million,
respectively, related to tax effects of the transaction accounting adjustments and debt financing
adjustments with the exception of the Netflix Termination Fee as described in Note 3.
-26-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
The pro forma adjustments to “Deferred
income tax assets” and “Deferred income tax liabilities” are based on the estimated deferred tax rates of the combined
company. The actual deferred tax liabilities may differ materially based on changes resulting from finalizing the deferred tax rates
for the combined company and finalizing the fair value adjustments for WBD’s net assets that are not reasonably estimable for the
purposes of the unaudited pro forma condensed combined financial statements.
All other income tax estimates and the related
tax rates may also differ materially in periods subsequent to the consummation of the Acquisition.
10) EARNINGS (LOSS) PER SHARE
The pro forma basic and diluted weighted
average number of common shares presented in the unaudited pro forma Condensed Combined Statements of Operations are based on the
weighted average number of common shares issued and outstanding as if the Transactions occurred on January 1, 2025. Since the
Warrants described in Note 8 will only be issued to holders of Paramount Class B Common Stock other than the Equity Investors
and their affiliates, the estimated value of the Warrants is considered a deemed dividend which results in the application of the
two-class method of EPS for the year ended December 31, 2025. Under the application of the two-class method, earnings per share
is calculated separately for the holders of Paramount Class B Common Stock who received the deemed dividend and the common
stockholders (comprised of the Equity Investors and their affiliates) who did not receive the deemed dividend. The calculation of
the weighted average number of common shares outstanding contemplates an adjustment for the issuance of shares of Paramount
Class B Common Stock pursuant to the PIPE financing and shares issued to holders of Replaced WBD Equity. All stock options, RSU
Awards, and warrants were excluded from the calculation of historical and pro forma diluted net loss per common share
("EPS") for the year ended December 31, 2025 because their inclusion would have been antidilutive since a net loss
was reported in the period. The dilutive impact of Paramount RSU Awards totaling 8 million were excluded from the calculation
of pro forma diluted EPS for the three months ended March 31, 2026 because their inclusion would have been antidilutive since
there is a pro forma net loss for the period. Also excluded from the calculation of diluted EPS in each period are the warrants
issued in the Skydance Transactions and the Warrants described in Note 8 because their inclusion also would have been anti-dilutive
in the period.
The table below presents the calculation of pro
forma EPS including, for the year ended December 31, 2025, amounts attributable to stockholders who received the deemed dividend
and stockholders who did not receive it. There was no deemed dividend for the three months ended March 31, 2026, and therefore this
presentation is not applicable.
-27-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(In millions)
Three
Months Ended March 31,
2026
Year
Ended December 31, 2025
Basic and diluted - Numerator:
Pro forma net loss
$ (966 )
$ (4,110 )
Deemed dividend to Class B common stockholders - Receiving
Warrants
$ -
$ (2,962 )
Undistributed Net Loss
$ -
$ (7,072 )
Net earnings attributable to Class B common stockholders
- Receiving Warrants
$ -
$ 2,296
Net loss attributable to common stockholders – Other
$ -
$ (6,406 )
Net loss attributable to common stockholders – All
$ (966 )
$ (4,110 )
Basic and diluted - Denominator:
Weighted average common shares outstanding for Class B
common stockholders - Receiving Warrants
472
Weighted average common shares outstanding for common stockholders
– Other
4,540
Weighted average common shares outstanding for common stockholders
– All
5,023
5,012
Pro forma EPS:
Basic and diluted EPS - Class B common stockholders -
Receiving Warrants
$ 4.86
Basic and diluted EPS - common stockholders – Other
$ (1.41 )
Basic and diluted EPS – common stockholders –
All
$ (.19 )
$ (.82 )
The shares of Paramount Class B Common Stock
to be issued in connection with the Equity Syndication are determined based on a Syndication Purchase Price equal to the 20-trading-day
volume-weighted average price (“VWAP”) of Paramount Class B Common Stock, calculated as of the third business day prior
to the closing of the Acquisition (the “Pricing Date”), subject to a price collar with a floor of $12.00 per share and a
cap of $16.02 per share.
For purposes of the unaudited pro forma condensed
combined financial information, the issuance of 3,913 million shares of Paramount Class B Common Stock included in weighted average
common shares outstanding for the three months ended March 31, 2026 and year ended December 31, 2025 has been calculated using
an assumed Syndication Purchase Price of $12.00 per share, which is the floor of the collar range. Accordingly, the aggregate number
of shares to be issued is equal to the aggregate commitment amount of $47 billion divided by the assumed Syndication Purchase Price.
The actual number of shares issued upon consummation
of the Acquisition will vary depending on the actual 20-day VWAP. If the VWAP is below the $12.00 floor, approximately 3,913 million
shares will be issued based on a price of $12.00 per share; if the VWAP is above the $16.02 cap, approximately 2,931 million shares will
be issued based on a price of $16.02 per share; and if the VWAP falls within the collar range, the Syndication Purchase Price will equal
the VWAP. As a result, the total number of shares issued is inversely related to the Syndication Purchase Price within the collar and
may differ materially from the pro forma amounts presented herein.
The unaudited pro forma condensed combined financial
information does not reflect any adjustment for potential variability in the number of shares issued resulting from changes in the VWAP,
as such amounts are not determinable as of the date of these financial statements.
Similarly, the exercise price of the
Warrants will be set based on the 20-day VWAP of Paramount Class B Common Stock calculated on the third business day prior to
the closing of the Acquisition. For purposes of determining the value of the deemed dividend in the calculation of basic and diluted
EPS, it has been assumed that the exercise price of the Warrants is $12.00, which is the floor of the collar range.
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May 19, 2026
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