JPMorgan (JPM.US) and Allen & Co. have emerged as clear beneficiaries in the bidding war for Warner Bros. Discovery (WBD.US) involving Netflix (NFLX.US) and Paramount (PSKY.US). According to securities filings disclosed on Tuesday, JPMorgan and Allen & Co., acting as advisors to Warner Bros., are each set to receive a fee of $90 million from the deal. Two informed sources revealed that JPMorgan also earned a substantial additional sum for its role in providing a $17.5 billion bridge loan to Warner Bros. This loan enabled Warner Bros. Discovery to separate its cable news networks and sports programming, including CNN, from its film and television division. The sources requested anonymity to discuss internal matters. JPMorgan declined to comment, and Allen & Co. did not respond to requests for comment.
This week, Netflix submitted a revised offer of $83 billion for Warner Bros.' studio and streaming assets, further escalating the bidding contest. All attention is now focused on Paramount, whose comprehensive $108 billion acquisition offer for Warner Bros. Discovery is set to expire on Wednesday. It is widely anticipated that Paramount will, at a minimum, extend its current offer, while investors hope for a higher bid.
Meanwhile, Warner Bros. is incurring costs amounting to hundreds of millions of dollars to split its two major business lines and sell the company. Warner Bros. disclosed that even before a sale is finalized, JPMorgan has already earned $189 million in fees for financing and other related services. According to a source familiar with the matter, these fees stem from JPMorgan's services in complex bond transactions and the bridge loan facility, which was crucial in splitting the company in two prior to the sale.
Furthermore, regardless of which competitor ultimately succeeds in acquiring Warner Bros., the owner of the HBO Max platform and the "Harry Potter" IP, JPMorgan and Allen & Co. are guaranteed to receive $90 million each in M&A advisory fees. Analysts and investors note that both Netflix and Paramount are interested in Warner Bros.' film and television studios, its vast content library, and key franchises including "Game of Thrones" and DC Comics superheroes like Batman and Superman. This is a premium asset that rarely becomes available on the market.
Details of the fees, as shown in U.S. securities filings, reveal that JPMorgan ranked second globally in M&A fees last year, with total fees of $3.1 billion. From Warner Bros. alone, JPMorgan's total fees will amount to $282 million. More than half of this, $189 million, came from financing and other fees related to the bridge loan. The bank received $15 million for providing a fairness opinion on Netflix's initial acquisition proposal in December and the revised proposal this week. JPMorgan is also set to receive $30 million in M&A fees by December 1, 2026. An additional $45 million will be paid upon the completion of the transaction. Over the past two years, Netflix has also paid JPMorgan an extra $3 million in fees.
One source stated that JPMorgan had collaborated with Warner Bros. for over two years, analyzing optimal M&A strategies, and ultimately proposed a higher-risk plan to split the company in two. To facilitate this, Warner Bros. repurchased approximately half of its bonds at a discount, financing the buyback through the $17.5 billion bridge loan provided by JPMorgan. Another source described this as the largest non-investment-grade bridge loan ever arranged on Wall Street. Warner Bros. stated that bondholders had only five days to accept the offer, which reduced the company's total debt by $2.2 billion.
Allen & Co. is also expected to receive at least $90 million from the transaction. Warner Bros. noted that one of its board members, Paul Gould, is a Managing Director at Allen & Co. Over the past two years, Warner Bros. has already paid Allen & Co. at least $6 million. Allen & Co. received $20 million for providing a fairness opinion on Netflix's acquisition proposal. The firm is expected to receive $30 million in M&A fees by December 1. Upon deal completion, Allen & Co. will receive a further $40 million. Warner Bros. indicated that Gould, who was a board member of Discovery Holding Co. prior to its merger with Discovery, is not part of the transaction's advisory team and will not receive any personal compensation from the deal.
These disclosed fees do not represent the total expenses for Warner Bros. in this transaction. The company has not yet disclosed fees paid to Evercore or its legal advisors, which include Debevoise & Plimpton, Kirkland & Ellis, and Wachtell, Lipton, Rosen & Katz. The $180 million paid to the two banks may only be a fraction of the total costs in this bidding war, as it does not include the fees that Netflix and Paramount are paying to their own financial and legal advisors.
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