Netflix has officially decided to walk away from a potential acquisition of Warner Bros. Discovery’s studio and streaming assets. This strategic withdrawal comes in the wake of a strengthened bid from Paramount Skydance, which the board of Warner Bros. Discovery (WBD) deemed superior. Earlier this week, Paramount increased its offer for WBD to $31 per share, an all-cash deal, marking a significant jump from its previous bid of $30 per share.
The move by Paramount, which has been actively pursuing WBD through a series of offers, effectively undermined a deal that had been negotiated between WBD and Netflix, set at $27.75 per share. The escalation in offers began last week, when Netflix extended a seven-day waiver to WBD, allowing them to resume negotiations with Paramount. This led to the higher bid that ultimately compelled Netflix to withdraw.
Paramount’s comprehensive bid encompasses all of WBD’s assets, including major pay TV networks like CNN, TBS, and TNT. With Netflix given a limited timeframe to revise its proposal following Paramount’s latest offer, the streaming giant chose to exit discussions instead. Following the announcement, Netflix’s stock surged by 10% in extended trading, while shares of Warner Bros. Discovery saw a decline of 2%.
In a joint statement, Netflix co-CEOs Ted Sarandos and Greg Peters expressed their disappointment while emphasizing their disciplined approach toward business. They acknowledged that while their proposed transaction could have generated shareholder value and was likely to gain regulatory approval, the financial metrics of matching Paramount’s offer no longer made sense. “At the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive,” they stated.
In its latest proposal, Paramount included a $7 billion breakup fee in case their merger fails to pass regulatory scrutiny. Additionally, Paramount committed to covering the $2.8 billion breakup fee owed to Netflix by WBD if their deal did not materialize.
Sarandos had previously noted the competitive dynamics led by Paramount, which he described as “flooding the zone with confusion for shareholders.” He mentioned that Netflix aimed to clarify the situation for WBD shareholders by allowing this new avenue for negotiations with Paramount.
Expressing gratitude toward WBD’s leadership for facilitating a fair negotiation process, the Netflix co-CEOs maintained that they believed they would have been effective stewards of Warner Bros.’ storied brands. They underscored the significance of the potential merger for strengthening the entertainment landscape and creating U.S. production jobs. However, they reiterated that the acquisition was always intended as a “nice to have” rather than an obligation to fulfill at any cost.
This latest development marks a significant turn in the ongoing battle for Warner Bros. Discovery, setting the stage for future negotiations and competitive maneuvers within the rapidly evolving media landscape.
