NEW YORK CITY, New York: As Hollywood's biggest streaming rivals circle Warner Bros Discovery, the bidding battle is already delivering a clear payday on Wall Street, regardless of which buyer ultimately prevails.

Investment banks JPMorgan and Allen & Company are set to earn roughly US$180 million in merger-and-acquisition fees for advising Warner Bros Discovery, according to a securities filing released this week. Each bank stands to collect $90 million tied to the transaction, no matter whether Netflix or Paramount emerges victorious.

The takeover contest intensified this week after Netflix revised its bid to $83 billion for Warner Bros Discovery's studio and streaming businesses. Attention has now shifted to Paramount, whose $108 billion all-cash tender offer for the entire company expired on January 21. Investors widely expect Paramount to extend its offer and potentially raise its price.

Behind the scenes, Warner Bros Discovery is spending hundreds of millions of dollars to restructure itself and prepare for a sale, including separating its cable networks and sports assets from its film and television operations.

JPMorgan has already earned significantly more than its advisory fee through its role in financing a $17.5 billion bridge loan that enabled Warner Bros Discovery to split its business. According to two people familiar with the deal, the loan supported a complex transaction that carved off cable news and sports programming, including CNN, from the studio division. The people declined to be named because the details are not public.

JPMorgan declined to comment. Allen & Company did not respond to a request for comment.

Bridge loan fees

Warner Bros Discovery said JPMorgan has already collected $189 million in financing and related fees ahead of the sale. Those fees stem from work on the bridge loan and a bond transaction used to restructure the company before the bidding process began.

Those earnings come on top of the $90 million in M&A fees JPMorgan will share with Allen & Company.

JPMorgan, which LSEG ranked second globally for M&A activity last year with $3.1 billion in fees, is on track to make about $282 million in total from Warner Bros Discovery, according to the filing. More than half of that — $189 million — comes from financing and other fees linked to the bridge loan.

The bank was paid $15 million for fairness opinions on Netflix's original offer in December and its revised bid this week. It is set to receive another $30 million in M&A fees by December 1, plus $45 million upon closing. Netflix has also paid JPMorgan an additional $3 million in costs over the past two years.

People familiar with the matter said JPMorgan worked with Warner Bros Discovery for more than two years evaluating strategic options, ultimately devising the plan to split the company in two. To execute it, Warner Bros Discovery bought back about half of its outstanding bonds at a discount, using the $17.5 billion bridge loan — described by one source as the largest non-investment-grade bridge loan ever arranged on Wall Street.

Bondholders were given just five days to tender their bonds, a move that reduced the company's gross debt by $2.2 billion, Warner Bros Discovery has said.

Breakdown of fees

Allen & Company is also set to earn at least $90 million. At least $6 million has already been paid over the past two years. The firm earned $20 million in fairness opinions for the Netflix offers, is due $30 million in M&A fees by December 1, and will collect another $40 million upon closing.

Warner Bros Discovery said board director Paul Gould, a managing director at Allen & Company, does not sit on the transaction advisory team and will not personally receive fees tied to the deal.

The $180 million total does not include fees paid to other advisers, including Evercore or legal firms Debevoise & Plimpton, Kirkland & Ellis, and Wachtell, Lipton, Rosen & Katz, nor the costs incurred by Netflix and Paramount for their own advisers.

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