Form 8-K
8-K — Paramount Skydance Corp
Accession: 0001104659-26-111174
Filed: 2026-09-28
Period: 2026-09-28
CIK: 0002041610
SIC: 4833 (TELEVISION BROADCASTING STATIONS)
Item: Regulation FD Disclosure
Item: Financial Statements and Exhibits
Documents
8-K — tm2610616d13_8k.htm (Primary)
EX-99.1 — EXHIBIT 99.1 (tm2610616d13_ex99-1.htm)
EX-99.2 — EXHIBIT 99.2 (tm2610616d13_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): September 28, 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. ¨
EXPLANATORY NOTE
As previously disclosed, Warner Bros. Discovery, Inc., a Delaware corporation
(“WBD”), Paramount Skydance Corporation, a Delaware corporation (the “Company”), and Prince Sub Inc., a Delaware
corporation and wholly owned subsidiary of the Company, entered into an Agreement and Plan of Merger on February 27, 2026, pursuant to
which, and subject to the terms and conditions therein, at the effective time of the merger to be entered into pursuant to such agreement,
Prince Sub Inc. will merge with and into WBD, with WBD surviving as a wholly owned subsidiary of the Company (the “Acquisition”).
Item 7.01
Regulation FD Disclosure.
Notes Offerings
On September 28, 2026, the Company announced that, in connection
with the permanent financing of the Acquisition, it intends to offer, subject to market and other conditions, approximately $44.4 billion
in aggregate principal amount of U.S. dollar-denominated senior secured first lien notes (the “First Lien Senior Secured Notes”)
and U.S. dollar- and euro-denominated senior secured second lien notes (together
with the First Lien Senior Secured Notes, the “Notes”), in each case, to qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in compliance
with Regulation S under the Securities Act. A copy of the press release announcing the offerings of the Notes is furnished
herewith as Exhibit 99.1.
The Notes have not been and will not be registered under
the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act and applicable state laws. Nothing in this Current Report on Form 8-K
should be construed to constitute an offer to sell, or a solicitation of an offer to buy, any Notes, and does not constitute
an offer, solicitation, or sale of any Notes in any jurisdiction in which such offer, solicitation, or sale would be unlawful.
Pro Forma Financial Information
In connection with the Notes offerings, the
Company is providing certain unaudited pro forma condensed combined financial information to prospective investors. The Company is
furnishing such information as Exhibit 99.2 to this Current Report on Form 8-K to satisfy the requirements of Regulation FD
(“Regulation FD”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such pro forma
condensed combined financial statements and other information of the Company give 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 such pro
forma condensed combined financial statements). The information contained in such unaudited pro forma condensed combined financial
statements is derived from the historical financial statements of the Company, WBD and Skydance Media, LLC (“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 covering the quarterly period ended June 30, 2026, and
any required reporting period subsequent thereto, will, if required, be filed by the Company on Form 8-K in compliance with the requirements
of the Securities and Exchange Commission (the “SEC”) no 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 the Company, WBD and
Skydance from which such unaudited pro forma condensed combined financial statements have been derived are included in the
Company’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 the Company’s Annual Report on Form 10-K/A, filed with the SEC on April 24, 2026, as superseded by, and solely to
the extent set forth in, the Company’s Current Report on Form 8-K, filed with the SEC on May 13, 2026; the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 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 Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 6, 2026; and the Company’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 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 and the exhibits hereto contain
“forward-looking statements” regarding, among other things, the potential Acquisition of WBD, including the terms and
timing thereof, and the proposed financing in connection with the Acquisition, including the consummation and proposed terms of the
Notes offerings. 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 the Company or WBD. Risks and uncertainties include,
but are not limited to: the risk that the closing conditions for the Acquisition or the Notes offerings will not be satisfied; the
possibility that the transaction will not be completed in the expected timeframe or at all; potential adverse effects to the
businesses of the Company 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 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 Company’s streaming business; the adverse impact on the 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 Company’s decisions to invest in new
businesses, products, services and technologies, and the evolution of the Company’s business strategy; the potential for loss
of carriage or other reduction in, or the impact of negotiations for, the distribution of the Company’s content; damage to the
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 Company’s intellectual property rights; domestic and global
political, economic and regulatory factors affecting the Company’s business generally or the Acquisition; the inability to
hire or retain key employees or secure creative talent; disruptions to the Company’s operations as a result of labor disputes;
risks and costs associated with the integration of, and the Company’s ability to integrate, the businesses of Paramount
Global, Skydance and WBD successfully and to achieve anticipated synergies, including in the amounts or on the timelines anticipated
to realize such 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 the
Company’s Class B common stock; the effect the Company’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 the Company,
including that the Company’s stockholders may not realize any change of control premium on shares of the Company’s Class
B common stock and that the Company may become subject to the control of a presently unknown third party; risks associated with the
Company’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 the Company’s Class B common stock; risks that
anti-takeover provisions in the Company’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 the Company’s Charter could limit a stockholder’s choice of forum for certain claims and discourage
lawsuits against the Company’s directors and officers; risks that corporate opportunity provisions in the Company’s
Charter could permit certain persons to pursue competitive opportunities that might otherwise be available to the Company; risks
associated with the 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; 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 the Company 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 the Company and WBD can be found in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 25, 2026, and
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 4,
2026, including, in each case, in the sections captioned “Cautionary Note Concerning Forward-Looking Statements” and
“Item 1A. Risk Factors,” and the Company’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, and in WBD’s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 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.paramount.com, ir.wbd.com or on request from the Company or WBD. The Company 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 of Paramount Skydance Corporation, dated September 28, 2026, announcing the launch of the Notes offerings.
99.2
Unaudited Pro Forma Condensed Combined Financial Information of Paramount Skydance Corporation.
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: September 28, 2026
EX-99.1 — EXHIBIT 99.1
EX-99.1
Filename: tm2610616d13_ex99-1.htm · Sequence: 2
Exhibit 99.1
Paramount
Skydance Corporation
Announces:
Launch of Notes Offerings
Los Angeles and New York, September 28, 2026 – PARAMOUNT
SKYDANCE CORPORATION (NASDAQ: PSKY) (the “Company”) today announced that it intends to offer approximately $44.4 billion
in aggregate principal amount of U.S. dollar-denominated senior secured first lien notes (the “First Lien Senior Secured
Notes”) and U.S. dollar- and euro-denominated senior secured second lien notes (together with the First Lien Senior Secured
Notes, the “Notes”), in each case, to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act
of 1933, as amended (the “Securities Act”), and outside the United States to non “U.S. persons” in
compliance with Regulation S under the Securities Act. The consummation of the Notes offerings is subject to market and other
conditions.
The Company intends to utilize the net proceeds of the Notes offerings,
together with cash on hand, borrowings under previously announced term loan financings and the net proceeds of the previously announced
equity financing, to, among other things, finance the purchase price for its previously announced acquisition (the “Acquisition”)
of Warner Bros. Discovery, Inc. (NASDAQ: WBD) (“WBD”) and the repayment of certain existing debt. The terms of the proposed
Notes offerings, including but not limited to the principal amounts, interest rates, currency denominations and maturities of the various
series of Notes, and the consummation of the Acquisition, are subject to a number of significant conditions, and there can be no assurance
that the Company will consummate any of these transactions on the anticipated terms or timing, or at all. Consummation of the Notes offerings
is not a condition to the consummation of the Acquisition.
The Notes and related guarantees are
being offered and issued pursuant to an exemption from the registration requirements of 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 Notes are only being offered and issued to persons who are (a) reasonably
believed to be “qualified institutional buyers” as defined in Rule 144A under the Securities Act, or (b) not “U.S.
persons,” as defined in Rule 902 of Regulation S under the Securities Act. The Notes have not been and, except with respect
to the First Lien Senior Secured Notes which will have registration rights, will not be registered under the Securities Act or any
state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the
registration requirements of the Securities Act and applicable state laws. 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, and does not constitute an offer,
solicitation, 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, among other things, the potential Acquisition of WBD, including the terms and timing thereof, and the
proposed financing in connection with the Acquisition, including the consummation and proposed terms of the Notes offerings. 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 the Company or WBD. Risks and uncertainties include, but are not limited to: the
risk that the closing conditions for the Acquisition or the Notes offerings will not be satisfied; the possibility that the
transaction will not be completed in the expected timeframe or at all; potential adverse effects to the businesses of the Company 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 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 Company’s streaming business; the adverse impact on the 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 Company’s decisions to invest in new businesses, products, services and
technologies, and the evolution of the Company’s business strategy; the potential for loss of carriage or other reduction in,
or the impact of negotiations for, the distribution of the Company’s content; damage to the 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 Company’s intellectual property rights; domestic and global political, economic and
regulatory factors affecting the Company’s business generally or the Acquisition; the inability to hire or retain key
employees or secure creative talent; disruptions to the Company’s operations as a result of labor disputes; risks and costs
associated with the integration of, and the Company’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 relating to the transactions contemplated by the transaction agreement entered into on July 7,
2024, between Paramount Global and Skydance Media, LLC, potentially resulting in substantial costs; volatility in the price of the
Company’s Class B common stock; the effect the Company’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 the Company,
including that the Company’s stockholders may not realize any change of control premium on shares of the Company’s Class
B common stock and that the Company may become subject to the control of a presently unknown third party; risks associated with the
Company’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 the Company’s Class B common stock; risks that
anti-takeover provisions in the Company’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 the Company’s Charter could limit a stockholder’s choice of forum for certain claims and discourage
lawsuits against the Company’s directors and officers; risks that corporate opportunity provisions in the Company’s
Charter could permit certain persons to pursue competitive opportunities that might otherwise be available to the Company; risks
associated with the 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; 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 the Company 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 the Company and WBD can be found in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 25, 2026, and
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 4,
2026, including, in each case, in the sections captioned “Cautionary Note Concerning Forward-Looking Statements” and
“Item 1A. Risk Factors,” and the Company’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, and in WBD’s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 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.paramount.com, ir.wbd.com or on request from the Company or WBD. The Company 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.
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: tm2610616d13_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 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). For purposes
of these pro forma financial statements, total cash consideration payable to WBD common stockholders is estimated at $78.0 billion, calculated
based on WBD Common Stock outstanding as of July 23, 2026, including the applicable Ticking Consideration as the Company assumes
for the purposes of preparing these pro forma financial statements that the transaction will close on October 6, 2026. In addition,
cash payments at closing of approximately $1.1 billion are estimated with respect to vested WBD equity awards as described under “Treatment
of Equity Awards” below. See Note 3 for additional details regarding the purchase consideration. The actual closing date of the
Acquisition is uncertain. The Acquisition will only be consummated following the satisfaction or waiver of the closing conditions in
the WBD Merger Agreement. If the Acquisition closes, additional Ticking Consideration (as described above) will be payable
for each day after September 30, 2026, including the closing date, that elapses until the eventual closing of the Acquisition. Certain
Equity Investors (as defined herein) have also agreed to subscribe for additional shares of Paramount Class B Common Stock in the
PIPE transactions (each as defined herein) in the amount required to cover such Ticking Consideration.
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.
-1-
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.
· 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 WBD 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 of the Acquisition.
Financing
The Company expects to utilize a combination
of equity financing and debt financing to fund the Acquisition. The Company has entered into equity subscription agreements (“Subscription
Agreements”) providing for up to $46.7 billion plus Ticking Consideration (and certain other additional amounts as defined in the
WBD Merger Agreement if required) 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).
-2-
The Equity Investors have assigned their subscription
rights under the Subscription Agreements (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 equal to its allocated amount divided by the Syndication Purchase Price, defined as the average of the daily volume-weighted
average prices (“VWAP”) of Paramount Class B Common Stock for the 20 trading days up to, and including, 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”). The Equity Syndication does not relieve the Equity Investors of their contractual commitments made to the Company.
Each share of Paramount Class B Common Stock
(excluding shares held by any Equity Investor or affiliate thereof, certain Company subsidiaries and the Paramount Global 401(k) Plan
and the Paramount Global Master Trust (collectively, the “Benefit Plans”)) as of an assumed record date of October 5,
2026 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 for early expiration
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 and warrant holders will have until such early expiration date to exercise their Warrants.
In addition, the Company entered into committed
debt financing arrangements, including the Pro Rata Credit Agreement, which provides for (i) $2.5 billion of three-year Term A-1
loans (“Term A-1 Loan Facility”), (ii) $2.5 billion of five-year Term A-2 loans (“Term A-2 Loan Facility”)
and (iii) $5.0 billion of five-year revolving credit commitments, as well as a $49.0 billion 364-day senior secured bridge term
loan facility (the “Bridge Commitments”). The bridge facility is intended as contingent financing and is not expected to
be drawn, unless permanent financing, including in the form of the New Permanent Financing (as defined below), is not in place prior
to the closing of the Acquisition. The Company intends to replace the Bridge Commitments with the New Permanent Financing in the form
of additional secured credit facilities and secured capital markets indebtedness across the investment grade and non-investment grade
markets as described below. Such financing, together with borrowings under the Pro Rata Credit Agreement, is expected to be included
in the Company’s post-closing capital structure and be incurred in the form of first lien and second lien indebtedness, including
term loan borrowings and secured notes (collectively, the “Acquisition Financing Transactions”). The unaudited pro forma
condensed combined financial statements reflect the assumed issuance of the New Permanent Financing and do not assume any borrowings
under the Bridge Commitments. The ultimate size, composition and terms of the Acquisition Financing Transactions remain subject to market
conditions and final execution.
The Acquisition Financing Transactions are expected
to be comprised of (i) $7.5 billion of seven-year Term B Loans (“Term B Loans”), (ii) $32.0 billion of New First
Lien Secured Notes (“New First Lien Secured Notes”), and (iii) $12.4 billion of New Second Lien Secured Notes (“New
Second Lien Secured Notes”), in an amount up to $51.9 billion (the “New Permanent Financing”), in addition to the $5.0
billion Term A loans under the Pro Rata Credit Agreement. The Company is pursuing certain capital markets financings to effect these
transactions and reduce or replace any remaining Bridge Commitments, either prior to the consummation of the Acquisition, or following
the consummation of the Acquisition on the basis of the entry into the 364-day senior secured bridge term loan facility (the “364-day
Bridge Loan Facility”) pursuant to the Bridge Commitments. However, the ultimate aggregate principal amount, allocation between
instruments and terms of such financing will depend on prevailing market conditions and other factors outside of the Company’s
control, and there can be no assurance that such financing will be consummated as currently contemplated (including on the basis of the
assumptions herein, inclusive of interest rates assumptions) or on favorable terms, or that such financing will be consummated at all.
For purposes of the unaudited pro forma condensed combined financial statements, the Company has assumed that the Acquisition Financing
Transactions are completed as described above, including the consummation of the New Permanent Financing prior to the consummation of
the Acquisition. In the event that the Bridge Commitments are drawn in order to finance the Acquisition, a fee of 0.5% payable to the
bridge financing sources would apply to the principal amount of any such debt funded.
On June 4, 2026, WBD entered into
seven-year $13.0 billion term loans (“WBD Dollar Term Loans”) and seven-year €1.7 billion term loans (the
“WBD Euro Term Loans” and together with the WBD Dollar Term Loans, the “WBD Term Loans”). The proceeds were
used to repay the $15.0 billion bridge facility that WBD had outstanding on March 31, 2026. The WBD Term Loans will be replaced
or refinanced with the 364-day Bridge Loan Facility or the proceeds of the offering of the New Permanent Financing, if not
refinanced by WBD prior to closing of the Acquisition. The unaudited pro forma condensed combined financial statements reflect the
settlement of the WBD Term Loans.
-3-
The Company also intends to refinance and terminate
WBD’s $4.0 billion accounts receivable securitization program (of which $3.9 billion was utilized as of June 30, 2026) within
close proximity to the closing of the Acquisition (or shortly thereafter). For purposes of the unaudited pro forma condensed combined
financial statements, the Company has assumed the termination of the securitization facility and the related repurchase of accounts receivable
are completed at closing.
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 June 30, 2026.
The consummation of the Acquisition is subject
to customary closing conditions, including no government order being in effect that enjoins the transaction, 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 Exchange Offer WBD Notes (defined below) for the applicable series of newly issued second
lien secured notes to be issued by the Company (the “Second Lien Secured Exchange Notes”) (each offer to exchange, an “Exchange
Offer” and together, the “Exchange Offers”). The Second Lien Secured Exchange Notes will be fully and unconditionally
guaranteed, jointly and severally, on a senior secured basis by certain of the Company’s wholly owned domestic subsidiaries that
are obligors under the Pro Rata Credit Agreement, subject to certain customary exceptions, and will be secured, subject to certain
limitations and exceptions and customary permitted liens, on a second priority basis, equally and ratably with all parity lien indebtedness
of the Company and related guarantors. In certain circumstances when, among other things, the Second Lien Secured Exchange Notes are
rated investment grade by two out of three rating agencies, the liens securing the Second Lien Secured Exchange Notes and related guarantees
may be automatically released.
The Exchange Offer 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 Exchange Offer WBD Notes tendered and (ii) per €1,000
in aggregate principal amount of Euro-denominated Exchange Offer WBD Notes tendered, in each case, is summarized below:
WBD’s
Notes to be
Exchanged (the “Exchange
Offer WBD Notes”)
Issuer
of
Exchange Offer
WBD Notes
Aggregate Principal Amount of Notes
Validly Delivered in Consent Solicitations
and Eligible to Participate in the
Exchange Offers
(amount in millions)
Second Lien Secured
Exchange Notes Offered
4.125%
Senior Notes due 2029
DCL
Issuer
$655.8
6.250%
Senior Secured Second Lien Notes due 2029
3.625%
Senior Notes due 2030
DCL
Issuer
$914.2
4.875%
Senior Secured Second Lien Notes due 2030
5.000%
Senior Notes due 2037
DCL
Issuer
$453.3
5.000%
Senior Secured Second Lien Notes due 2037
6.350%
Senior Notes due 2040
DCL
Issuer
$438.1
6.350%
Senior Secured Second Lien Notes due 2040
4.950%
Senior Notes due 2042
DCL
Issuer
$130.4
4.950%
Senior Secured Second Lien Notes due 2042
4.875%
Senior Notes due 2043
DCL
Issuer
$141.6
4.875%
Senior Secured Second Lien Notes due 2043
5.200%
Senior Notes due 2047
DCL
Issuer
$3.2
5.200%
Senior Secured Second Lien Notes due 2047
-4-
5.300%
Senior Notes due 2049
DCL
Issuer
$247.9
5.300%
Senior Secured Second Lien Notes due 2049
4.054%
Senior Notes due 2029
DGH
Issuer
$1,353.8
6.304%
Senior Secured Second Lien Notes due 2029
4.279%
Senior Notes due 2032
DGH
Issuer
$2,691.8
4.904%
Senior Secured Second Lien Notes due 2032
5.050%
Senior Notes due 2042
DGH
Issuer
$4,104.7
5.050%
Senior Secured Second Lien Notes due 2042
5.141%
Senior Notes due 2052
DGH
Issuer
$949.9
5.141%
Senior Secured Second Lien Notes due 2052
4.302%
Senior Notes due 2030
DGH
Issuer
€234.4
5.802%
Senior Secured Second Lien Notes due 2030
4.693%
Senior Notes due 2033
DGH
Issuer
€316.6
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”) the aggregate principal amount of notes eligible to participate in
the Tender Offers. Specifically, the Company is offering to purchase (i) the DCL Issuer’s $1.234 billion aggregate principal
amount of 3.950% Senior Notes due 2028 and (ii) the DGH Issuer’s $1.189 billion aggregate principal amount of 3.755% Senior
Notes due 2027 (the “Tender Offer WBD Notes”).
For purposes of these pro forma financial statements,
it is assumed that 100% of the $12.7 billion principal amount of Exchange Offer WBD Notes eligible to participate in the Exchange Offers
and 100% of the $2.423 billion of the Tender Offer WBD Notes subject to 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 Second Lien Secured
Exchange Notes exchanged for Exchange Offer WBD Notes in the Exchange Offers, and the terms to which such indebtedness will be subject,
and the amount of Tender Offer 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.
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 NAI’s shareholders
under a purchase and sale agreement and, through their ownership of NAI, the NAI Equity Investors indirectly 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”.
-5-
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 June 30, 2026 combines the historical consolidated balance sheet of Paramount as of June 30, 2026 and the historical
consolidated balance sheet of WBD as of June 30, 2026, giving effect to the Acquisition as if it had occurred on June 30, 2026.
The unaudited pro forma Condensed Combined Statement
of Operations for the six months ended June 30, 2026 combines the historical Consolidated Statement of Operations of Paramount for
the six months ended June 30, 2026 and the historical Consolidated Statement of Operations of WBD for the six months ended June 30,
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 discussed in Note 5 and Note 8.
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 June 30,
2026, filed on August 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 June 30,
2026, filed on August 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, in each case, also incorporated
by reference in the Current Report of Paramount on Form 8-K with which these pro forma
financial statements are filed.
-6-
PARAMOUNT SKYDANCE
CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AT JUNE 30, 2026
(In millions)
Pro
Forma Adjustments
Paramount
Skydance
Corp.
WBD
Adjusted (2)
WBD
Transaction
Accounting
Adjustments
Financing
Adjustments (5)
Pro
Forma
Assets
Current Assets:
Cash
and cash equivalents
$ 1,627
$ 3,369
$ (93,772 )
(3a)
$ 56,379
(5a)
$ 7,803
(3,900 )
(8d)
(2,423 )
(5d)
(62 )
(5c)
(382 )
(5e)
46,967
(5g)
Receivables,
net
6,178
4,952
2,763
(4)
—
13,893
Programming
and other inventory
1,655
377
—
—
2,032
Prepaid
expenses and other current assets
1,560
3,751
—
—
5,311
Total current
assets
11,020
12,449
(94,909 )
100,479
29,039
Property and equipment, net
2,216
6,652
(215 )
(4g)
—
8,653
Programming and other inventory
15,641
19,335
4,858
(4)
—
39,834
Goodwill
2,034
25,861
29,427
(4a)
—
57,322
Intangible assets, net
5,649
25,922
14,177
(4)
—
45,748
Operating lease assets
1,033
2,663
16
(4k)
—
3,712
Deferred income tax assets
1,347
620
—
—
1,967
Advance consideration for WBD
acquisition
2,800
—
(2,800 )
(4)
—
—
Other assets
2,671
3,746
1,001
(4h),
(8d)
—
7,418
Total
Assets
$ 44,411
$ 97,248
$ (48,445 )
$ 100,479
$ 193,693
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts
payable
$ 511
$ 1,060
$ (49 )
(4)
$ —
$ 1,522
Accrued
expenses
2,158
4,907
(2,464 )
(4)
—
4,601
Participants’
share and royalties payable
2,606
3,529
—
—
6,135
Accrued
programming and production costs
1,801
2,114
(559 )
(4)
—
3,356
Deferred
revenues
1,486
1,514
—
—
3,000
Debt
665
1,493
—
—
2,158
Other
current liabilities
1,373
1,526
560
(4)
—
3,459
Total current
liabilities
10,600
16,143
(2,512 )
—
24,231
Long-term debt
14,491
30,530
(18,659 )
(4c)
56,379
(5a)
80,277
(2,424 )
(5d)
(40 )
(5c)
Participants’ share and
royalties payable
1,437
2,356
—
—
3,793
Pension
and postretirement benefit obligations
1,169
177
—
—
1,346
Deferred income tax liabilities
68
5,579
5,860
(9a)
—
11,507
Operating lease liabilities
1,046
3,126
—
—
4,172
Programming obligations
581
1,411
—
—
1,992
Other liabilities
2,209
3,931
54
(4)
—
6,194
Paramount stockholders’
equity:
Class A
Common Stock
—
27
(27 )
(4f)
—
—
Class B
Common Stock
1
—
—
4
(5g)
5
Additional
paid-in-capital
13,307
56,022
(56,022 )
(4f)
46,963
(5g)
60,270
Treasury
stock
—
(8,244 )
8,244
(4f)
—
—
Retained
earnings (accumulated deficit)
(1,544 )
(14,279 )
40,271
(4f),
(8d)
1
(5d)
(2,297 )
(25,861 )
(4a)
(22 )
(5c)
(481 )
(8b)
(382 )
(5e)
Accumulated
other comprehensive income (loss)
7
(688 )
688
(4f)
—
7
Total Paramount stockholders'
equity
11,771
32,838
(33,188 )
46,564
57,985
Noncontrolling
interests
1,039
1,157
—
—
2,196
Total Equity
12,810
33,995
(33,188 )
46,564
60,181
Total
Liabilities and Equity
$ 44,411
$ 97,248
$ (48,445 )
$ 100,479
$ 193,693
The accompanying notes are an integral part of
these unaudited pro forma condensed combined financial statements.
-7-
PARAMOUNT SKYDANCE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2026
(In millions, except per share amounts)
Pro Forma
Adjustments
Paramount
Skydance
Corp.
WBD
Adjusted (2)
WBD
Transaction
Accounting
Adjustments
Financing
Adjustments (5)
Pro Forma
Revenues
$ 14,260
$ 17,610
$ (222 )
(4)
$ —
$ 31,648
Costs and expenses:
Operating
9,298
9,760
284
(4)
—
19,342
Selling, general and administrative
2,854
4,298
(136 )
(4)
—
7,016
Netflix Termination Fee
—
2,800
(2,800 )
3a(5)
—
—
Depreciation and amortization
726
2,385
1,117
(4)
—
4,228
Restructuring,
transaction-related items and other corporate matters
291
599
—
—
890
Total costs and
expenses
13,169
19,842
(1,535 )
—
31,476
Operating income (loss)
1,091
(2,232 )
1,313
—
172
Interest expense, net
(426 )
(1,036 )
518
(4)
(2,144 )
(5f)
(3,088 )
Loss on extinguishment of debt
—
(102 )
—
—
(102 )
Other items, net
(58 )
(44 )
—
—
(102 )
Earnings (loss) before income taxes and equity in (loss) earnings
of investee companies
607
(3,414 )
1,831
(2,144 )
(3,120 )
(Provision for) benefit from income
taxes
(275 )
653
244
(9c)
536
(9c)
1,158
Equity in (loss)
earnings of investee companies, net of tax
(116 )
17
—
—
(99 )
Net earnings (loss) (Paramount and noncontrolling interests)
216
(2,744 )
2,075
(1,608 )
(2,061 )
Net earnings attributable to noncontrolling
interests
(7 )
(23 )
—
—
(30 )
Net earnings (loss) attributable to
Paramount
$ 209
$ (2,767 )
$ 2,075
$ (1,608 )
$ (2,091 )
Net earnings (loss) per common share attributable to Paramount:
Basic
$ .19
$ (.42 )
Diluted
$ .19
$ (.42 )
Weighted average number of common shares outstanding:
Basic
1,113
3,918
(10)
5,031
Diluted
1,119
3,912
(10)
5,031
The accompanying notes are an integral part of
these unaudited pro forma condensed combined financial statements.
-8-
PARAMOUNT SKYDANCE CORPORATION
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
Financing
Adjustments (5)
Pro Forma
Revenues
$ 29,394
$ 37,296
$ (558 )
(4)
$ —
$ 66,132
Costs and expenses:
Operating
20,347
21,853
740
(4)
—
42,940
Programming charges
41
—
—
—
41
Selling, general and administrative
6,136
8,284
11
(4)
—
14,431
Depreciation and amortization
1,469
5,684
1,301
(4)
—
8,454
Impairment charges
157
—
—
—
157
Restructuring, transaction-related items
and other corporate matters
1,453
698
515
(4)
22
(5c)
2,697
9
(5d)
Total costs and
expenses
29,603
36,519
2,567
31
68,720
Gain (loss) on
dispositions
35
(39 )
—
—
(4 )
Operating income (loss)
(174 )
738
(3,125 )
(31 )
(2,592 )
Interest expense, net
(760 )
(1,879 )
881
(4)
(4,655 )
(5f)
(6,413 )
Gain (loss) from investments
(40 )
6
—
—
(34 )
Gain on extinguishment of debt
—
2,945
—
10
(5d)
2,955
Other items, net
(51 )
(147 )
—
—
(198 )
Earnings (loss) before income taxes and equity in loss of
investee companies
(1,025 )
1,663
(2,244 )
(4,676 )
(6,282 )
Benefit from (provision for) income
taxes
319
(896 )
435
(9c)
1,170
(9c)
1,028
Equity in loss of investee companies,
net of tax
(275 )
(18 )
—
—
(293 )
Net earnings (loss) (Paramount and noncontrolling interests)
(981 )
749
(1,809 )
(3,506 )
(5,547 )
Net earnings attributable to noncontrolling interests
(490 )
(24 )
—
—
(514 )
Net loss attributable to redeemable noncontrolling
interests
—
2
—
—
2
Net earnings (loss) attributable to
Paramount
$ (1,471 )
$ 727
$ (1,809 )
$ (3,506 )
$ (6,059 )
Net loss per common share attributable to Paramount (basic
and diluted):
Class B common stockholders - Receiving Warrants
$ 4.49
Common stockholders - Other
$ (1.80 )
Common stockholders - All
$ (1.34 )
$ (1.21 )
Weighted average number of common shares outstanding (basic
and diluted):
Class B common stockholders - Receiving Warrants
470
(10)
470
Common stockholders - Other
1,099 (6j)
3,448
(10)
4,547
Common stockholders
- All
1,099 (6j)
3,918
(10)
5,017
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
combined 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 June 30, 2026 combines the historical consolidated balance sheet of Paramount as of June 30, 2026, and the historical
consolidated balance sheet of WBD as of June 30, 2026, giving effect to the Acquisition as if it had occurred on June 30, 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 six months ended June 30, 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 as well as, among other things, the timing and financing for the Acquisition. 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 June 30, 2026
Historical WBD
Reclassification
Adjustments
WBD, Adjusted
Assets
Current Assets:
Cash and cash equivalents
$ 3,369
$ —
$ 3,369
Receivables, net
4,952
—
4,952
Programming and other inventory
—
377
377
Prepaid expenses and other current assets
4,218
(467 )
3,751
Total current assets
12,539
(90 )
12,449
Film and television content rights and games
19,245
(19,245 )
—
Property and equipment, net
6,652
—
6,652
Programming and other inventory
—
19,335
19,335
Goodwill
25,861
—
25,861
Intangible assets, net
25,922
—
25,922
Operating lease assets
—
2,663
2,663
Deferred income taxes
—
620
620
Other noncurrent assets
7,029
(7,029 )
—
Other assets
—
3,746
3,746
Total Assets
$ 97,248
$ —
$ 97,248
-11-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
At June 30, 2026
Historical WBD
Reclassification
Adjustments
WBD, Adjusted
Liabilities and Equity
Current Liabilities:
Accounts payable
$ 1,060
$ —
$ 1,060
Accrued liabilities
12,076
(12,076 )
—
Accrued expenses
—
4,907
4,907
Participants' share and royalties payable
—
3,529
3,529
Accrued programming and production costs
—
2,114
2,114
Deferred revenues
1,514
—
1,514
Current portion of debt
1,493
(1,493 )
—
Debt
—
1,493
1,493
Other current liabilities
—
1,526
1,526
Total current liabilities
16,143
—
16,143
Noncurrent portion of debt
30,530
(30,530 )
—
Long-term debt
—
30,530
30,530
Participants' share and royalties payable
—
2,356
2,356
Pension and postretirement benefit obligations
—
177
177
Deferred income taxes
5,579
(5,579 )
—
Deferred income tax liabilities, net
—
5,579
5,579
Operating lease liabilities
—
3,126
3,126
Programming obligations
—
1,411
1,411
Other noncurrent liabilities
11,001
(11,001 )
—
Other liabilities
—
3,931
3,931
Stockholders’ equity:
Class A common stock
27
—
27
Additional paid-in-capital
56,022
—
56,022
Treasury stock
(8,244 )
—
(8,244 )
Accumulated deficit
(14,279 )
—
(14,279 )
Accumulated other comprehensive loss
(688 )
(688 )
Total Parent stockholders’ equity
32,838
—
32,838
Noncontrolling interests
1,157
—
1,157
Total Equity
33,995
—
33,995
Total Liabilities and Equity
$ 97,248
$ —
$ 97,248
-12-
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
Six Months Ended June 30, 2026
Historical WBD
Reclassification
Adjustments
WBD, Adjusted
Revenues
$ 17,610
$ —
$ 17,610
Costs and expenses:
Costs of revenues, excluding depreciation and amortization
9,264
(9,264 )
—
Operating
—
9,760
9,760
Selling, general and administrative
5,039
(741 )
4,298
Netflix Termination Fee
2,800
—
2,800
Depreciation and amortization
2,385
—
2,385
Restructuring and other charges
317
(317 )
—
Restructuring, transaction-related items and other corporate matters
—
599
599
Impairments and loss on dispositions
37
(37 )
—
Total costs and expenses
19,842
—
19,842
Operating loss
(2,232 )
—
(2,232 )
Interest expense, net
(1,092 )
56
(1,036 )
Loss on extinguishment of debt
(102 )
—
(102 )
Earnings from equity investees, net
23
(23 )
—
Other (expense) income, net
12
(12 )
—
Other items, net
—
(44 )
(44 )
Loss before income taxes
(3,391 )
(23 )
(3,414 )
Benefit from income taxes
—
653
653
Income tax benefit (expense)
647
(647 )
—
Equity in earnings of investee companies, net of tax
—
17
17
Net loss
(2,744 )
—
(2,744 )
Net income attributable to noncontrolling interests
(23 )
—
(23 )
Net loss available to Warner Bros. Discovery, Inc.
$ (2,767 )
$ —
$ (2,767 )
-13-
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
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,
plus the applicable Ticking Consideration, which for the purposes of preparing these pro forma financial statements has been calculated
based on an assumed Acquisition closing date of October 6, 2026.
-14-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(a) The preliminary purchase consideration is calculated as follows:
Preliminary Purchase Consideration (in millions except per share amounts)
Amount
Common stock outstanding (1)
2,514
Per share cash purchase price
$ 31
Cash paid to WBD’s shareholders before Ticking Consideration
77,948
Ticking Consideration paid to WBD’s shareholders (2)
42
Total cash paid to WBD’s shareholders inclusive of Ticking Consideration
77,990
Add: Cash paid related to pre-combination portion of replacement awards (3)
1,074
Add: Settlement of indebtedness (4)
14,708
Total cash consideration
93,772
Add: Netflix termination fee (5)
2,800
Add: Liabilities assumed related to pre-combination portion of replacement awards (3)
614
Less: Settlement of pre-existing relationships (6)
—
Total preliminary purchase consideration
$ 97,186
(1) The amount of estimated shares of WBD Common Stock is based
on 2,510,703,314 shares of WBD Common Stock issued and outstanding as of July 23, 2026, per WBD’s Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2026, as filed with the SEC on August 6, 2026, adjusted for 3,737,162 WBD PRSUs that
were vested, but not distributed at that date.
(2) Reflects $42 million of estimated Ticking Consideration paid
to holders of outstanding WBD Common Stock under the terms of the WBD Merger Agreement, assuming an Acquisition closing date of October 6,
2026.
(3) Reflects $1.1 billion in estimated cash payments to holders
of vested WBD stock options, RSUs, and PRSUs, and $614 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 $560 million recorded
within “Other current liabilities” and $54 million within “Other liabilities” on the unaudited pro forma Condensed
Combined Balance Sheet. Such estimated cash payments and estimated liabilities each include $1 million of Ticking Consideration assuming
an Acquisition closing date of October 6, 2026.
(4) Reflects the settlement of the amounts outstanding at June 30,
2026 on the $13.0 billion WBD Dollar Term Loans and €1.7 billion WBD Euro Term Loans totaling $14.7 billion. The adjustment to remove
the $14.7 billion in term loans from the unaudited pro forma Condensed Combined Balance Sheet is reflected net of deferred issuance costs
of $0.2 billion.
(5) 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 six months ended June 30,
2026 to eliminate the expense recognized by WBD in its historical financial statements related to the termination fee.
(6) Settlement of pre-existing relationships are comprised of receivables
due from WBD of approximately $222 million and payables due to WBD and accrued programming liabilities related to WBD, of $41 million
and $181 million, respectively.
-15-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(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 is 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 the 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
$ 3,369
Receivables, net
4,729
Programming and other inventory
24,570
Prepaid expenses and other current assets
3,751
Property and equipment, net
6,437
Goodwill (1)
55,288
Intangible assets, net
40,099
Operating lease assets
2,679
Deferred income taxes
620
Other assets
4,085
Total assets acquired
$ 145,627
Accounts payable
$ 1,052
Accrued expenses
2,107
Participants’ share and royalties payable
5,885
Accrued programming and production costs
1,736
Deferred revenues
1,514
Debt
13,364
Deferred income taxes
11,455
Operating lease liabilities
3,126
Programming obligations
1,411
Pension and postretirement benefit obligation
177
Other liabilities
5,457
Total liabilities assumed
$ 47,284
Noncontrolling interests
1,157
Total preliminary purchase consideration
$ 97,186
(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.
-16-
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 TRANSACTION ACCOUNTING ADJUSTMENTS
Balance Sheet Pro Forma Adjustments
At June 30, 2026
WBD Transaction Accounting Adjustments
Transaction
Accounting
Adjustments
Intercompany
Transactions (7)
Total
Assets
Current Assets:
Cash and cash equivalents
$ (97,672 )
3a, 8d
$ —
$ (97,672 )
Receivables, net
2,986
3a(6), 8d
(223 )
2,763
Total current assets
(94,686 )
(223 )
(94,909 )
Programming and other inventory
4,979
4i
(121 )
4,858
Property and equipment, net
(215 )
4g
—
(215 )
Goodwill
29,405
4a
22
29,427
Intangible assets, net
14,177
4b
—
14,177
Operating lease assets
16
4k
—
16
Advance consideration for WBD acquisition
(2,800 )
3a(5)
—
(2,800 )
Deferred income tax assets
—
—
—
Other assets
1,001
4h, 8d
—
1,001
Total Assets
$ (48,123 )
$ (322 )
$ (48,445 )
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
$ (41 )
3a(6)
$ (8 )
$ (49 )
Accrued expenses
(2,464 )
3a(5), 8a, 8d
—
(2,464 )
Accrued programming and production costs
(181 )
3a(6)
(378 )
(559 )
Other current liabilities
560
3a(3)
—
560
Total current liabilities
(2,126 )
(386 )
(2,512 )
Long-term debt
(18,659 )
4c
—
(18,659 )
Deferred income tax liabilities
5,796
9a
64
9a
5,860
Other liabilities
54
3a(3)
—
54
Stockholders’ equity:
Class A common stock
(27 )
4f
—
(27 )
Additional paid-in-capital
(56,022 )
4f
—
(56,022 )
Treasury stock
8,244
4f
—
8,244
Accumulated deficit
13,929
4f, 8b, 8d
—
13,929
Accumulated other comprehensive loss
688
4f
—
688
Total stockholders’ equity
(33,188 )
—
(33,188 )
Total Equity
(33,188 )
—
(33,188 )
Total Liabilities and Equity
$ (48,123 )
$ (322 )
$ (48,445 )
-17-
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
Six
Months Ended June 30, 2026
WBD
Transaction Accounting Adjustments
Transaction
Accounting
Adjustments
Intercompany
Transactions (7)
Total
Revenues
$ —
$ (222 )
$ (222 )
Costs and expenses:
Operating
504
4j
(220 )
284
Selling,
general and administrative
(105 )
4k,
8c, 8d
(31 )
(136 )
Netflix
Termination Fee
(2,800 )
3a(5)
—
(2,800 )
Depreciation
and amortization
1,117
4d
—
1,117
Restructuring,
transaction-related items and
other corporate matters
—
—
—
Total
costs and expenses
(1,284 )
(251 )
(1,535 )
Operating income
1,284
29
1,313
Interest
expense, net
518
5f
—
518
Earnings (loss) before income
taxes and equity in (loss) earnings of investee companies
1,802
29
1,831
Provision
for income taxes
251
9c
(7 )
9c
244
Net earnings
(loss)
2,053
22
2,075
Net earnings
(loss) attributable to Paramount
$ 2,053
$ 22
$ 2,075
Year Ended December 31, 2025
WBD Transaction Accounting Adjustments
Transaction
Accounting
Adjustments
Intercompany
Transactions (7)
Total
Revenues
$ —
$ (558 )
$ (558 )
Costs and expenses:
Operating
1,300
4j
(560 )
740
Selling, general and administrative
82
4k, 8c, 8d
(71 )
11
Depreciation and amortization
1,301
4d
—
1,301
Restructuring, transaction-related items and other
corporate matters
515
8a
—
515
Total costs and expenses
3,198
(631 )
2,567
Operating loss
(3,198 )
73
(3,125 )
Interest expense, net
893
5f
(12 )
881
Earnings (loss) before income taxes and equity in
loss of investee companies
(2,305 )
61
(2,244 )
Provision for income taxes
451
9c
(16 )
9c
435
Net earnings (loss)
(1,854 )
45
(1,809 )
Net earnings (loss) attributable to Paramount
$ (1,854 )
$ 45
$ (1,809 )
-18-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(4a) Reflects the following adjustments to goodwill related to the
Acquisition and elimination of intercompany transactions:
Pro Forma
Adjustment
Reversal of historical WBD goodwill
$ (25,861 )
(4f)
Preliminary purchase consideration
97,186
(3a)
Reverse WBD historical liability for Netflix Termination Fee
(2,800 )
(3a(5))
Settlement of WBD Term Loans
(14,467 )
(5b)
Effect of preliminary fair value adjustment to acquired intangible assets
(14,177 )
(4b)
Effect of preliminary fair value adjustment to assumed debt
(4,192 )
(4c)
Effect of preliminary fair value adjustment to acquired property and equipment
215
(4g)
Effect of preliminary fair value adjustment to acquired investments
(339 )
(4h)
Effect of preliminary fair value adjustment to acquired programming assets
(4,979 )
(4i)
Effect of preliminary fair value adjustment to acquired leases
(16 )
(4k)
Tax effects of Acquisition
5,812
(4e), (9a)
Reversal of historical WBD equity, net of historical goodwill reversal
(6,977 )
(4f)
Transaction accounting adjustments
29,405
Elimination of intercompany transactions
22
(7)
Total pro forma adjustment
$ 29,427
(4b) The pro forma adjustment reflects the estimated incremental
fair value of WBD’s intangible assets of $14.2 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 are presented in the table below.
Estimated
Straight-Line
Amortization Period
Fair Value
Six Months
Ended June 30,
2026
Year Ended
December 31,
2025
Trade names
10 - 15 years
$ 9,040
$ 306
$ 610
Franchises
15 years
11,650
388
777
Character rights
15 years
1,785
60
119
Affiliate relationships
5 - 13 years
10,649
796
1,588
Technology
3.5 years
1,850
264
529
Subscriber relationships
2.5 years
1,600
320
640
Advertisers (relationship & backlog)
2 years
3,525
880
1,763
Total
$ 40,099
$ 3,014
$ 6,026
Less: historical amortization
1,822
4,605
Pro forma adjustment
$ 1,192
$ 1,421
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.
-19-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(4c) Adjustment includes the fair market value step down of outstanding
debt of $4.2 billion and the settlement of WBD’s existing $14.7 billion WBD Term Loans net of $241 million in remaining deferred
issuance costs related to the WBD Term Loans, which is described further in Note 5.
(4d)
The pro forma adjustments to “Depreciation and amortization” on the unaudited pro forma Condensed Combined Statements of Operations reflect (i) incremental amortization expense related to the intangible assets of $1,192 million and $1,421 million for the six months ended June 30, 2026 and year ended December 31, 2025, respectively, and (ii) a reduction in depreciation expense related to property and equipment of $75 million and $120 million for the six months ended June 30, 2026 and year ended December 31, 2025, respectively. A 10% change in the valuation of finite-lived intangible assets and property and equipment would result in a corresponding increase or decrease in depreciation and amortization expense of approximately $342 million and $683 million for the six months ended June 30, 2026 and year ended December 31, 2025, respectively, based on the estimated useful lives described herein.
(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.
(4g) The balance sheet pro forma adjustment reflects the estimated
fair value step down of WBD’s property and equipment of $0.2 billion. The estimated depreciation period, estimated fair values,
and related pro forma adjustments for depreciation expense are presented in the table below.
Estimated
Straight-Line Depreciation Period
Fair Value
Six Months Ended June 30, 2026
Year Ended December 31, 2025
Total property and equipment
1 - 27 years
$ 6,437
$ 403
$ 807
Less: historical depreciation
478
927
Pro forma adjustment
$ (75 )
$ (120 )
(4h) The pro forma adjustment reflects the estimated incremental
fair value of certain unconsolidated investments held by WBD of $0.3 billion.
(4i) The pro forma adjustment reflects the estimated incremental
fair value of WBD’s programming assets of $5.0 billion. The pro forma adjustment to recognize net incremental content amortization
expense has been computed with the assumption that the programming assets will be amortized over their estimated useful lives on a straight-line
basis, the revenue forecast model or sum of the years’ digits method, as the Company continues to evaluate the pattern of the economic
benefit.
(4j)
The pro forma adjustments to “Operating expenses” on the unaudited pro forma Condensed Combined Statements of Operations of $0.5 billion and $1.3 billion for the six months ended June 30, 2026 and year ended December 31, 2025, respectively, reflect the net incremental amortization expense related to the programming assets. A 10% change in the valuation of programming assets would result in a corresponding increase or decrease in expense of approximately $50 million and $130 million for the six months ended June 30, 2026 and year ended December 31, 2025, respectively.
(4k) The pro forma adjustments reflect an increase to “Operating
lease assets” for the fair value adjustment to acquired leases with favorable market conditions of $16 million, and the resulting
increase to "Selling, general and administrative expenses" of $1 million and $2 million for the six months ended June 30,
2026 and year ended December 31, 2025, respectively.
-20-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
For all other assets and liabilities and noncontrolling
interests the book value was deemed to approximate fair value, and therefore no fair value adjustments were recorded.
5) FINANCING RELATED ADJUSTMENTS
Debt Financing 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 permanent financing in the form of $51.9 billion of
New Permanent Financing, (iii) the issuance of $12.7 billion of Second Lien Secured Exchange Notes in exchange for certain Exchange
Offer WBD Notes pursuant to the Exchange Offers, (assuming 100% participation in Exchange Offers), (iv) the purchase of $2.4 billion
of Tender Offer WBD Notes for cash pursuant to the Tender Offers, (assuming 100% participation in Tender Offers), (v) the replacement
of the $49.0 billion 364-day Bridge Loan Facility, and (vi) the settlement of WBD’s existing $14.7 billion WBD Term Loans.
The pro forma adjustments assume that the Acquisition Financing Transactions will be used to fund the Acquisition and to refinance or
replace interim financing arrangements, including the 364-day Bridge Loan Facility. The ultimate aggregate principal amount and form of
such indebtedness and the terms to which such indebtedness will be subject are subject to market conditions and final execution, and actual
results may differ from those reflected herein. Other than the assumptions relating to the New Permanent Financing, 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.
Balance Sheet Pro Forma Adjustments
Debt
Issuance (5a)
Repayment of
WBD Term
Loans (5b)
Exchange
Offers (5c)
Tender
Offers (5d)
Pro Forma
Adjustment
New 3-year Term A-1 Loans
$ 2,492
$
2,492
New 5-year Term A-2 Loans
2,492
2,492
New 7-year Term B Loans
7,374
7,374
New First Lien Secured Notes
31,693
31,693
New Second Lien Secured Notes
12,328
12,328
Second Lien Secured Exchange Notes
10,626
10,626
Existing WBD Long-term Debt
(14,467 )
(10,666 )
(2,424 )
(27,557
)
Pro forma adjustment to debt
$
39,448
(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, $7.5 billion Term B Loans, $32.0 billion New First Lien Secured Notes and $12.4
billion New Second Lien Secured Notes, net of debt issuance costs of $0.5 billion. The New Permanent Financing will replace or refinance
the 364-day Bridge Loan Facility and proceeds of the New Permanent Financing or the 364-day Bridge Loan Facility, as applicable, will
be used to fund the Acquisition. Accordingly, $56.4 billion of cash proceeds were 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 the $13.0 billion WBD Dollar Term Loans and the €1.7 billion WBD Euro Term Loans net of $0.2 billion
in remaining deferred issuance costs related to the WBD Term Loans. The transaction accounting adjustment to debt on the unaudited pro
forma Condensed Combined Balance Sheet also includes a fair market value step down of $4.2 billion on WBD’s existing long-term
debt, which is not reflected in the table above. See Note 4c.
(5c) The adjustments reflect the impact of the Exchange Offers, specifically the $40 million of payments
to bondholders, in connection with the Exchange Offers, assuming that 100% of the Exchange Offer WBD Notes eligible to participate
in 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 Second Lien Secured Exchange
Notes are expected to be materially consistent with the current terms. Accordingly, the payments to the bondholders are reflected as
a reduction in the carrying value. The carrying value of the Exchange Offer WBD Notes immediately prior to completion of the
Exchange Offers and the fair value of the Second Lien Secured Exchange Notes has been assumed to be equal to the estimated fair
value of the Exchange Offer WBD Notes assumed in the Acquisition. Estimated third-party expenses of $22 million are included within
“Restructuring, transaction-related items and other corporate matters”.
-21-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(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 $1.230 billion immediately prior to extinguishment, and (ii) the DGH Issuer’s $1.2 billion aggregate principal amount
of 3.755% Senior Notes due 2027 with a carrying amount of $1.194 billion immediately prior to extinguishment, assuming 100% of such notes
subject to the Tender Offers will be tendered in the applicable Tender Offer. The estimated cash consideration for the Tender Offer 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 June 30, 2026. The estimated gain on extinguishment of debt of $10 million
is reflected on 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 $9 million are included within “Restructuring, transaction-related items and
other corporate matters”.
(5e) The adjustment reflects the cash paid for certain commitment
fees associated with the 364-day Bridge Loan Facility and write-off of those fees due to the replacement or refinancing of the 364-day
Bridge Loan Facility with permanent financing. There can be no assurance that such permanent financing will be consummated as currently
contemplated or on favorable terms, or that such financing will be consummated at all.
Statements
of Operations Pro Forma Adjustments
(5f) The adjustments reflect the following increases (decreases)
to Interest expense, net:
Six Months
Ended June 30,
2026
Year Ended
December 31,
2025
Estimated interest expense on new financing (1)
Financing adjustments
$ 2,121
$ 4,213
Elimination of historical interest expense on WBD bridge facility and term loans (2)
Transaction accounting adjustments
(615 )
(647 )
Adjustment of historical interest expense on debt subject to fair market value step down (3)
Transaction accounting adjustments
110
(165 )
Elimination of historical interest expense on WBD loans settled through the Tender Offers (4)
Transaction accounting adjustments
(52 )
(160 )
Adjustment to historical interest expense on WBD loans subject to the Exchange Offers (5)
Transaction accounting adjustments
39
79
Amortization of deferred debt issuance costs (6)
Financing adjustments
23
442
Total adjustments to Interest expense, net
$ 1,626
$ 3,762
Total financing adjustments
$ 2,144
$ 4,655
Total transaction accounting adjustments
$ (518 )
$ (893 )
(1) Represents the additional interest expense in connection with
the Term A-1 Loans, Term A-2 Loans, Term B Loans, New First Lien Secured Notes and New Second Lien Secured Notes.
-22-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
The interest rates on the Term A-1
Loans and Term A-2 Loans are calculated using SOFR adjusted for a margin and are initially estimated to be approximately 5.94%.
The unaudited pro forma condensed combined
financial statements assume an interest rate of 7.50% for the Term B Loans, the New First Lien Secured Notes, and New Second Lien Secured
Notes included in the Acquisition Financing Transactions, reflecting the assumed weighted average cost of indebtedness. For purposes of
the unaudited pro forma condensed combined financial statements, the Company has assumed that the Acquisition Financing Transactions are
completed as described herein, including the consummation of the New Permanent Financing prior to the consummation of the Acquisition.
In the event the New Permanent Financing does not occur prior to the Acquisition, or does not occur at all, the maximum interest rate
that would initially apply pursuant to the 364-day Bridge Loan Facility is SOFR + 1.875%, increasing by 0.25% for each 3 months that the
364-day Bridge Loan Facility remains outstanding to a maximum of SOFR + 2.625%, unless or until the 364-day Bridge Loan Facility is refinanced.
A sensitivity analysis on interest
expense with respect to the variable rate Term A-1 Loans and Term A-2 Loans and the interest expense related to the New Permanent Financing
for the six months ended June 30, 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 $36 million and $72 million for the six months ended June 30, 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 $288 million and $575 million for the six months ended
June 30, 2026 and year ended December 31, 2025, respectively.
(2) Represents the elimination of historical interest expense associated with WBD’s $15.0 billion
bridge facility and the elimination of historical interest expense associated with the $13.0 billion WBD Dollar Term Loans
and €1.7 billion WBD Euro Term Loans.
(3) In July 2025, WBD made a significant principal payment
to reduce debt. The adjustment to interest expense for the year ended December 31, 2025 reflects a $493 million reduction in interest
expense resulting from the composition of debt outstanding as of June 30, 2026 compared with the debt outstanding within the historical
period, offset by a $328 million increase in interest expense resulting from the accretion of the fair value step down of assumed debt.
(4) Represents elimination of historical interest expense related
to historical WBD debt repurchased as a result of the Tender Offers, assuming that 100% of the Tender Offer WBD Notes eligible to participate
in the Tender Offers will be tendered in the applicable Tender Offer.
(5) For purposes of these pro forma financial statements, the Company
has assumed 100% of the Exchange Offer WBD Notes eligible to participate in the Exchange Offers will be exchanged in the applicable Exchange
Offer. This adjustment represents the incremental interest expense associated with the difference in coupon rates between the Exchange
Offer WBD Notes eligible to participate in the Exchange Offers and the Second Lien Secured Exchange Notes.
(6) Represents amortization of issuance costs associated with new
debt issued by the Company and the write-off of deferred issuance costs associated with the 364-day Bridge Loan Facility that is expected
to be replaced by the New Permanent Financing if the Bridge Commitments are not reduced by the New Permanent Financing prior to the Acquisition.
-23-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
Transaction accounting adjustments on the unaudited
pro forma Condensed Combined Statement of Operations for the year ended December 31, 2025 also include a $12 million intercompany
elimination.
Equity Financing
Adjustments
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 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.
(5g) In connection with the Acquisition, the pro forma adjustment
reflects a net increase in cash of $46.97 billion, representing $47 billion of proceeds from the PIPE financing, inclusive of an assumed
additional $44 million of PIPE proceeds related to the assumed $44 million of Ticking Consideration, partially offset by approximately
$47 million of issuance costs. The transaction results in the issuance of approximately 3.9 billion shares of Paramount Class B
Common Stock at $0.001 par value, with the excess proceeds recorded as additional paid-in-capital assuming a Syndication Purchase Price
of $12.00 per share.
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.
-24-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
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
Revenues
$ 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) (Paramount and noncontrolling
interests)
412
(540 )
(463 )
82
(472
)
(981 )
Net earnings
attributable to noncontrolling interests
(447 )
(46 )
3
—
—
(490 )
Net loss attributable
to Paramount
$ (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.
(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.
-25-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
(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
(in millions)
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
-26-
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.
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 July 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
$ 515
$ 515
8a
Total adjustment
$ 515
$ 515
(8a) Reflects estimated transaction-related costs of $515 million
anticipated to be incurred by Paramount between July 2026 to actual transaction close, consisting mainly of banking, legal, advisory
and other professional fees in connection with the Acquisition as well as a payment and cost reimbursements anticipated, subject to court
approval, in connection with the settlement of certain merger-related litigation actions. 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 $481 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 totals $515 million, net of the related tax benefit, where applicable,
of $34 million (see Note 9).
Issuance of
Shares 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, as further
described in Note 5. These activities include the cancellation of all issued and outstanding shares of 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 as merger consideration.
Each share of Paramount Class B Common Stock
(excluding shares held by any Equity Investor or affiliate thereof, certain Company subsidiaries and Benefit Plans) as of an assumed record
date of October 5, 2026, will receive, without payment of any consideration, one 10-year 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, Paramount may call the Warrants for early expiration 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 and warrant holders will have until such early expiration date to exercise their Warrants. In connection with this series of
issuances, existing Paramount RSUs will be “made-whole” for the value of the Warrants pursuant to a pre-existing anti-dilution
provision in Paramount equity plans. The pro forma financial statements do not include an adjustment for the “make-whole”
provision, as the issuance is not expected to result in incremental stock-based compensation expense.
-27-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
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 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 notional units with respect
to a number of shares of Paramount Class B Common Stock based on the ratio of (i) Merger Consideration divided by (ii) the
15 day VWAP of Paramount Class B Common Stock, where the 15 day period will end 3
trading days prior to the closing date of the Acquisition.
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 (see Note 5); 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, other than as described in Note 10, the effect of these warrants is not reflected in the unaudited pro forma condensed combined
financial information.
(8c) The pro forma adjustments reflect the new compensation arrangements
executed with WBD 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 $67 million decrease and $164 million increase in compensation expense for the
six months ended June 30, 2026, and year ended December 31, 2025, respectively. The pro forma adjustments also reflect new
compensation arrangements approved by the Board for a grant of Paramount RSUs (the “2026 RSUs”) to certain Paramount executive
employees in connection with the Acquisition which will become effective at the time of closing. The 2026 RSUs will vest in equal quarterly
installments over a five-year period following the closing of the Acquisition, subject to the applicable executive’s continued
employment with the Company through the applicable vesting date, and will vest in full (to the extent then-unvested) upon a change in
control of the Company (as defined in the Paramount 2025 Incentive Award Plan). The unaudited pro forma condensed combined financial
statements assume Paramount RSUs totaling approximately 11 million will be granted for the 2026 RSUs, resulting in an increase to compensation
expense of $15 million and $61 million for the six months ended June 30, 2026 and year ended December 31, 2025, respectively.
Accounts Receivable Securitization Facility
(8d) The pro forma adjustment reflects the refinancing and termination
of WBD’s securitized accounts receivable facility which is expected within close proximity to the closing of the Acquisition (or
shortly thereafter).
Cash
Other
Assets
Receivables,
net
Accrued
Expenses
Deferred
income tax
liabilities,
net
Retained
Earnings
(accumulated
deficit)
AR Securitization Facility Termination
$ (3,900 )
$ 662
$ 3,208
$ (179 ) $
18
$ 131
-28-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
The adjustments to the unaudited pro
forma Condensed Combined Statements of Operations reflect the removal of expenses associated with the accounts receivable securitization
fees, resulting in a decrease to “Selling, general and administrative expenses” of $54 million and $145 million for the six
months ended June 30, 2026 and year ended December 31, 2025, respectively.
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 transaction accounting adjustments and financing adjustments. An estimated tax rate of 25% was applied in determining the
figures presented below.
Balance Sheet Pro Forma Adjustments
At June 30, 2026
Transaction
Accounting
Adjustments
Financing
Adjustments
Deferred income tax assets
n/a
n/a
Deferred income tax liabilities
$ 5,860
9a
$ —
Goodwill
$ 5,876
9b
$ —
n/a - not applicable
Statements of Operations Pro Forma Adjustments
Six Months Ended June 30, 2026
Year Ended December 31, 2025
Transaction
Accounting
Adjustments
Financing
Adjustments
Transaction
Accounting
Adjustments
Financing
Adjustments
Benefit from income taxes
$ 244
9c
$ 536
9c
$ 435
9c
$ 1,170
9c
(9a) The adjustment to “Deferred income tax liabilities”
as of June 30, 2026 includes an increase of $5,812 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 $64 million for the deferred tax impact of the
elimination of transactions between Paramount and WBD as described in Note 7, and a decrease of $16 million for the deferred tax impact
of the transaction-related costs and accounts receivable securitization fees adjustments 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 six months ended June 30, 2026 and year ended December 31, 2025 reflect tax benefits of $780 million and
$1,605 million, respectively, related to tax effects of the transaction accounting adjustments and financing adjustments with the exception
of the Netflix Termination Fee as described in Note 3.
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.
-29-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
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 certain holders of Paramount Class B Common Stock, 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 (primarily 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. 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 6 million were excluded from the calculation of pro forma diluted EPS for the six months ended
June 30, 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 and “make-whole” RSUs 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 six months ended June 30, 2026, and therefore this
presentation is not applicable.
(Shares in millions)
Six Months Ended June
30, 2026
Year Ended December
31, 2025
Basic and diluted - Numerator:
Pro forma net loss
$ (2,091 )
$ (6,059 )
Deemed dividend to Class B common stockholders - Receiving Warrants
n/a
$ (2,952 )
Undistributed Net Loss
n/a
$ (9,011 )
Net earnings attributable to Class B common stockholders - Receiving Warrants
n/a
$ 2,108
Net loss attributable to common stockholders - Other
n/a
$ (8,167 )
Net loss attributable to common stockholders - All
$ (2,091 )
$ (6,059 )
Basic and diluted - Denominator:
Weighted average common shares outstanding for Class B common stockholders - Receiving Warrants
n/a
470
Weighted average common shares outstanding for common stockholders - Other
n/a
4,547
Weighted average common shares outstanding for common stockholders - All
5,031
5,017
Pro forma EPS:
Basic and diluted EPS - Class B common stockholders - Receiving Warrants
n/a
$ 4.49
Basic and diluted EPS - common stockholders - Other
n/a
$ (1.80 )
Basic and diluted EPS - common stockholders - All
$ (.42 )
$ (1.21 )
n/a - not applicable
-30-
PARAMOUNT SKYDANCE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(Tabular dollars in millions, except per share
amounts)
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 average of the
daily VWAPs of Paramount Class B Common Stock, for the 20 trading days up to, and including, 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 3,918 million shares of Paramount Class B Common Stock included in weighted average
common shares outstanding for the six months ended June 30, 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 3,918 million shares
will be issued based on a price of $12.00 per share; if the VWAP is above the $16.02 cap, approximately 2,935 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 pro forma financial statements.
Similarly, the exercise price of the Warrants
will be set based on the average of the daily VWAPs of Paramount Class B Common Stock for the 20 trading days up to, and including,
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.
-31-
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