# WBD / PSKY: “Ticking fee” sweetener — what it *actually* changes in deal-risk pricing (filings-based) ## 1) What changed in the bid terms (primary-source recap) Paramount Skydance (PSKY) amended its **$30.00 per WBD share all-cash** tender offer to add **incremental cash consideration if the deal has not closed by December 31, 2026**. ["$30.00 per Share"](0001104659-26-012397|0) ["not closed beyond December 31, 2026"](0001104659-26-012403|1) ### The “ticking fee” mechanics In the amended tender-offer materials, the consideration is described as: - **$30.00 + “Ticking Consideration”**. ["$30.00 *plus* any applicable Ticking Consideration"](0001104659-26-012397|0) - **Ticking Consideration = $0.00277778 per day after Dec 31, 2026**, capped at **$0.25 per 90-day period**. ["$0.00277778 multiplied"](0001104659-26-012397|0) ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) - PSKY’s own press release frames it as **$0.25/share per quarter** beyond Dec 31, 2026. ["$0.25 per share “ticking fee,” payable"](0001104659-26-012401|1) ### Timing guardrails (outside date / extensions) The draft merger agreement attached to the amended materials uses an **“End Date” of December 31, 2026** with **automatic extensions to March 31, 2027 and then June 30, 2027** if certain regulatory conditions are the remaining blockers. ["December 31, 2026 (as may be extended, the “End Date”)"](0001104659-26-012397|2) ["extended to … March 31, 2027"](0001104659-26-012397|2) ["extended to … June 30, 2027"](0001104659-26-012397|2) **Interpretation:** This structure is explicitly designed to compensate WBD holders for *regulatory delay beyond 12/31/26*, but also implicitly signals PSKY is willing to “carry” the deal into 1H27 (at a cost). ["To underscore confidence… adding an incremental cash consideration… for every quarter the transaction is not closed beyond December 31, 2026"](0001104659-26-012401|1) ["End Date shall automatically be extended"](0001104659-26-012397|2) --- ## 2) What the ticking fee is worth economically (and what it is *not*) ### 2.1 The ticking fee is “negative carry” for the buyer, “positive carry” for WBD holders Using the disclosed cap: - Increment per 90-day period: **$0.25/share**. ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) - Annualized (computed): **$1.00/share per year** (4 quarters × $0.25). ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) - As a % of $30 headline price (computed): **~3.33% per year** ($1.00 ÷ $30.00). ["$30.00"](0001104659-26-012397|0) ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) **Key point:** This is economically meaningful *only* in states of the world where (i) the deal is still alive after 12/31/26, and (ii) closing drifts into 2027. ### 2.2 The ticking fee mostly hedges “delay risk,” not “break risk” A ticking fee does **not** directly protect you if the transaction fails and downside reverts to a standalone WBD valuation. It improves the *expected value conditional on closing*, and improves the *shape* of outcomes when closing is late. Put differently, it helps answer: “What if regulators take longer than expected but we still win?”—not: “What if regulators kill it / the board blocks it / financing breaks?” --- ## 3) Why this can tighten (some) deal-risk discounts in WBD — the probability math Deal spreads are (conceptually) driven by: > **Expected payout** = P(close) × PV(consideration if close) + (1 − P(close)) × PV(standalone value if break) The ticking fee affects the **PV(consideration if close)** term in *delayed-close scenarios*. It does **not** mechanically raise P(close). ### 3.1 The biggest “mechanical” impact is on *tail delay* If the market had been pricing a non-trivial chance of a close slipping into 2027 (but still closing), the ticking fee increases expected consideration in that region. Because the term is specified **per day** ($0.00277778/day) and capped per 90 days, you can model it cleanly as incremental “carry” starting 1/1/27. ["$0.00277778 multiplied by the number of calendar days elapsed after December 31, 2026"](0001104659-26-012397|0) ### 3.2 It also partially offsets the “time value” penalty investors place on long regulatory processes In classic merger arb, longer time-to-close tends to widen spreads (capital tied up, uncertainty compounding). A ticking fee directly compensates for some of that—so **a given calendar delay should require less spread widening than before**. --- ## 4) Does it change *deal risk* itself? Mostly no — but it changes incentives and signaling ### 4.1 It is a *signal* of willingness to pay for duration (and confidence narrative) PSKY frames the ticking fee as underscoring “confidence in the speed and certainty of regulatory approval.” ["underscoring Paramount’s confidence"](0001104659-26-012401|1) Signal value can matter because: - If the market feared PSKY would walk if timing drifted, agreeing to pay for drift can be read as higher commitment. - However, **a ticking fee is not a binding regulatory clearance**; it is just a pricing term. ### 4.2 It increases buyer’s cost of regulatory delay (which can cut two ways) For PSKY, the ticking fee is a real expected-cost increase in delay states, which could: - **Increase buyer urgency** to get approvals (positive for close timing), *but also* - **Increase buyer pain** if regulators drag it out, potentially increasing renegotiation pressure later (negative for certainty), depending on what termination / MAE / financing provisions allow. The filings show PSKY also added or emphasized other “certainty” items (e.g., funding the Netflix termination fee, backstopping a debt exchange cost) in the same package—suggesting the broader goal is to reduce perceived closing friction rather than only to increase price. ["prepayment of the $2.8 billion termination fee"](0001104659-26-012397|0) ["reimburse… the $1.5 billion fee"](0001104659-26-012397|0) --- ## 5) What remains the gating risk drivers (i.e., what the sweetener does *not* fix) ### 5.1 Regulatory outcome risk is still the core binary PSKY discloses progress steps like **certifying compliance with DOJ’s Second Request** and notes this triggers a waiting period. ["certified that is has complied"](0001104659-26-012401|1) ["commences a 10-day waiting period"](0001104659-26-012401|1) That’s helpful color on process, but it’s not a clearance decision. ### 5.2 “Outside date” structure can still create cliffs Even with automatic extensions, the agreement language indicates the process is still bounded and conditional. The deal timeline can still hit “end date” cliffs where termination rights become relevant, depending on which conditions remain open. ["End Date shall automatically be extended"](0001104659-26-012397|2) A ticking fee makes late close more valuable, but it can’t eliminate the scenario where the deal dies at/near an end date. --- ## 6) So—does the sweetener change how I’d price deal risk in WBD? ## Bottom line: **It should reduce the “delay discount,” but it shouldn’t materially change the “break discount.”** - If your prior spread framework assumed a meaningful probability of a **close in 2027**, you should raise your expected deal payout in those states by ~**3.33%/year of additional time** (computed from the $0.25/quarter cap), which supports **a tighter spread** for the same P(close). ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) ["$30.00"](0001104659-26-012397|0) - If your spread was mostly compensating for **binary regulatory failure / board process / structural break risk**, the ticking fee is **second-order**; it doesn’t rescue the downside state. ### Practical pricing implication (how it usually shows up) In market terms, I’d expect the ticking fee to: 1) **Increase the “deal floor” for late-close scenarios** (helpful), and 2) **Lower the sensitivity of the spread to closing-date slippage** (helpful), while 3) Leaving **headline probability-of-close debates largely intact** (still the main driver). --- ## Appendix: Key bid-term excerpts (for quick reference) | Term | What filings say | |---|---| | Base consideration | $30.00 per share cash. ["$30.00 per Share"](0001104659-26-012397|0) | | Ticking mechanism | $0.00277778/day after 12/31/26, capped at $0.25 per 90 days. ["$0.00277778 multiplied"](0001104659-26-012397|0) ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) | | “Quarterly” framing | $0.25 per share per quarter beyond 12/31/26 (company description). ["$0.25 per share “ticking fee,” payable"](0001104659-26-012401|1) | | End date extensions | 12/31/26 → auto-extend to 3/31/27 → 6/30/27 (regulatory-dependent). ["extended to … March 31, 2027"](0001104659-26-012397|2) ["extended to … June 30, 2027"](0001104659-26-012397|2) | --- If you want, tell me where WBD is trading *now* (or the current spread to $30) and what close-date you’re underwriting, and I’ll translate the ticking fee into an implied **P(close)** (or implied break probability) consistent with that spread—still grounded in the disclosed deal terms above.

# WBD / PSKY: “Ticking fee” sweetener — what it *actually* changes in deal-risk pricing (filings-based) ## 1) What changed in the bid terms (primary-source recap) Paramount Skydance (PSKY) amended its **$30.00 per WBD share all-cash** tender offer to add **incremental cash consideration if the deal has not closed by December 31, 2026**. ["$30.00 per Share"](0001104659-26-012397|0) ["not closed beyond December 31, 2026"](0001104659-26-012403|1) ### The “ticking fee” mechanics In the amended tender-offer materials, the consideration is described as: - **$30.00 + “Ticking Consideration”**. ["$30.00 *plus* any applicable Ticking Consideration"](0001104659-26-012397|0) - **Ticking Consideration = $0.00277778 per day after Dec 31, 2026**, capped at **$0.25 per 90-day period**. ["$0.00277778 multiplied"](0001104659-26-012397|0) ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) - PSKY’s own press release frames it as **$0.25/share per quarter** beyond Dec 31, 2026. ["$0.25 per share “ticking fee,” payable"](0001104659-26-012401|1) ### Timing guardrails (outside date / extensions) The draft merger agreement attached to the amended materials uses an **“End Date” of December 31, 2026** with **automatic extensions to March 31, 2027 and then June 30, 2027** if certain regulatory conditions are the remaining blockers. ["December 31, 2026 (as may be extended, the “End Date”)"](0001104659-26-012397|2) ["extended to … March 31, 2027"](0001104659-26-012397|2) ["extended to … June 30, 2027"](0001104659-26-012397|2) **Interpretation:** This structure is explicitly designed to compensate WBD holders for *regulatory delay beyond 12/31/26*, but also implicitly signals PSKY is willing to “carry” the deal into 1H27 (at a cost). ["To underscore confidence… adding an incremental cash consideration… for every quarter the transaction is not closed beyond December 31, 2026"](0001104659-26-012401|1) ["End Date shall automatically be extended"](0001104659-26-012397|2) --- ## 2) What the ticking fee is worth economically (and what it is *not*) ### 2.1 The ticking fee is “negative carry” for the buyer, “positive carry” for WBD holders Using the disclosed cap: - Increment per 90-day period: **$0.25/share**. ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) - Annualized (computed): **$1.00/share per year** (4 quarters × $0.25). ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) - As a % of $30 headline price (computed): **~3.33% per year** ($1.00 ÷ $30.00). ["$30.00"](0001104659-26-012397|0) ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) **Key point:** This is economically meaningful *only* in states of the world where (i) the deal is still alive after 12/31/26, and (ii) closing drifts into 2027. ### 2.2 The ticking fee mostly hedges “delay risk,” not “break risk” A ticking fee does **not** directly protect you if the transaction fails and downside reverts to a standalone WBD valuation. It improves the *expected value conditional on closing*, and improves the *shape* of outcomes when closing is late. Put differently, it helps answer: “What if regulators take longer than expected but we still win?”—not: “What if regulators kill it / the board blocks it / financing breaks?” --- ## 3) Why this can tighten (some) deal-risk discounts in WBD — the probability math Deal spreads are (conceptually) driven by: > **Expected payout** = P(close) × PV(consideration if close) + (1 − P(close)) × PV(standalone value if break) The ticking fee affects the **PV(consideration if close)** term in *delayed-close scenarios*. It does **not** mechanically raise P(close). ### 3.1 The biggest “mechanical” impact is on *tail delay* If the market had been pricing a non-trivial chance of a close slipping into 2027 (but still closing), the ticking fee increases expected consideration in that region. Because the term is specified **per day** ($0.00277778/day) and capped per 90 days, you can model it cleanly as incremental “carry” starting 1/1/27. ["$0.00277778 multiplied by the number of calendar days elapsed after December 31, 2026"](0001104659-26-012397|0) ### 3.2 It also partially offsets the “time value” penalty investors place on long regulatory processes In classic merger arb, longer time-to-close tends to widen spreads (capital tied up, uncertainty compounding). A ticking fee directly compensates for some of that—so **a given calendar delay should require less spread widening than before**. --- ## 4) Does it change *deal risk* itself? Mostly no — but it changes incentives and signaling ### 4.1 It is a *signal* of willingness to pay for duration (and confidence narrative) PSKY frames the ticking fee as underscoring “confidence in the speed and certainty of regulatory approval.” ["underscoring Paramount’s confidence"](0001104659-26-012401|1) Signal value can matter because: - If the market feared PSKY would walk if timing drifted, agreeing to pay for drift can be read as higher commitment. - However, **a ticking fee is not a binding regulatory clearance**; it is just a pricing term. ### 4.2 It increases buyer’s cost of regulatory delay (which can cut two ways) For PSKY, the ticking fee is a real expected-cost increase in delay states, which could: - **Increase buyer urgency** to get approvals (positive for close timing), *but also* - **Increase buyer pain** if regulators drag it out, potentially increasing renegotiation pressure later (negative for certainty), depending on what termination / MAE / financing provisions allow. The filings show PSKY also added or emphasized other “certainty” items (e.g., funding the Netflix termination fee, backstopping a debt exchange cost) in the same package—suggesting the broader goal is to reduce perceived closing friction rather than only to increase price. ["prepayment of the $2.8 billion termination fee"](0001104659-26-012397|0) ["reimburse… the $1.5 billion fee"](0001104659-26-012397|0) --- ## 5) What remains the gating risk drivers (i.e., what the sweetener does *not* fix) ### 5.1 Regulatory outcome risk is still the core binary PSKY discloses progress steps like **certifying compliance with DOJ’s Second Request** and notes this triggers a waiting period. ["certified that is has complied"](0001104659-26-012401|1) ["commences a 10-day waiting period"](0001104659-26-012401|1) That’s helpful color on process, but it’s not a clearance decision. ### 5.2 “Outside date” structure can still create cliffs Even with automatic extensions, the agreement language indicates the process is still bounded and conditional. The deal timeline can still hit “end date” cliffs where termination rights become relevant, depending on which conditions remain open. ["End Date shall automatically be extended"](0001104659-26-012397|2) A ticking fee makes late close more valuable, but it can’t eliminate the scenario where the deal dies at/near an end date. --- ## 6) So—does the sweetener change how I’d price deal risk in WBD? ## Bottom line: **It should reduce the “delay discount,” but it shouldn’t materially change the “break discount.”** - If your prior spread framework assumed a meaningful probability of a **close in 2027**, you should raise your expected deal payout in those states by ~**3.33%/year of additional time** (computed from the $0.25/quarter cap), which supports **a tighter spread** for the same P(close). ["$0.25 per 90 calendar day period"](0001104659-26-012397|0) ["$30.00"](0001104659-26-012397|0) - If your spread was mostly compensating for **binary regulatory failure / board process / structural break risk**, the ticking fee is **second-order**; it doesn’t rescue the downside state. ### Practical pricing implication (how it usually shows up) In market terms, I’d expect the ticking fee to: 1) **Increase the “deal floor” for late-close scenarios** (helpful), and 2) **Lower the sensitivity of the spread to closing-date slippage** (helpful), while 3) Leaving **headline probability-of-close debates largely intact** (still the main driver). --- ## Appendix: Key bid-term excerpts (for quick reference) | Term | What filings say | |---|---| | Base consideration | $30.00 per share cash. ["$30.00 per Share"](0001104659-26-012397|0) | | Ticking mechanism | $0.00277778/day after 12/31/26, capped at $0.25 per 90 days. ["$0.00277778 multiplied"](0001104659-26-012397|0) ["shall not exceed $0.25 per 90 calendar day period"](0001104659-26-012397|0) | | “Quarterly” framing | $0.25 per share per quarter beyond 12/31/26 (company description). ["$0.25 per share “ticking fee,” payable"](0001104659-26-012401|1) | | End date extensions | 12/31/26 → auto-extend to 3/31/27 → 6/30/27 (regulatory-dependent). ["extended to … March 31, 2027"](0001104659-26-012397|2) ["extended to … June 30, 2027"](0001104659-26-012397|2) | --- If you want, tell me where WBD is trading *now* (or the current spread to $30) and what close-date you’re underwriting, and I’ll translate the ticking fee into an implied **P(close)** (or implied break probability) consistent with that spread—still grounded in the disclosed deal terms above.