Netflix’s stock surged over nine percent before the market opened on Friday following its decision to withdraw from the bidding war for Warner Bros Discovery. Conversely, Paramount’s shares rose approximately 10 percent as it emerged victorious in securing some of the most coveted TV and film assets globally.
In a statement on Thursday, Netflix indicated that it was stepping back from its proposal to acquire Warner Bros. Discovery’s streaming and studio assets, citing that the deal was no longer financially appealing after Paramount Skydance revised its offer to $31 per share for the esteemed Hollywood studio.
“We have always maintained a disciplined approach, and at the revised price to match Paramount Skydance’s latest bid, the deal is no longer financially viable for us, so we have opted not to match the Paramount Skydance offer,” Netflix stated.
Warner Bros. Discovery announced earlier in the day that Paramount’s updated $31-per-share offer was superior to the existing agreement with Netflix. Previously, Netflix had granted Warner Bros. a seven-day waiver to solicit a “best and final offer” from Paramount.
In its initial bid, Netflix had agreed in December to a deal valued at $27.75 per share to acquire Warner Bros.’ streaming and studio assets, emphasizing that the offer, coupled with the planned divestment of Warner Bros.’ cable assets, would result in enhanced shareholder value.
Paramount, in its revised bid, raised the termination fee to $7 billion US in case the deal fails to secure regulatory approval, up from the initial $5.8 billion US. Paramount expressed satisfaction with the Warner Bros. board’s unanimous reaffirmation that its bid was superior.
The Ellison Trust has increased its equity commitment to $45.7 billion US, backed by Larry Ellison, with additional funds available to meet Paramount’s bank solvency requirements. Bank of America Merrill Lynch, Citi, and Apollo are offering $57.5 billion US in debt financing, up from the previous commitment of $54 billion US.
Paramount’s CEO David Ellison, son of Larry Ellison, co-founder of Oracle, has connections to President Donald Trump, who has expressed support for the merger. However, the deal could face antitrust scrutiny in Washington, and California’s Attorney General Rob Bonta may challenge it.
According to TD Cowen analysts, there is a possibility of European regulators also having a say in the matter. The merger between Paramount and Warner Bros would bring together two major Hollywood studios, along with two streaming platforms (HBO Max and Paramount+) and two news operations (CNN and CBS).
Netflix’s announcement came after CEO Ted Sarandos visited the White House, although he did not meet with Trump. The president was reportedly displeased with political remarks made by a Netflix board member and demanded her removal, sparking concerns among Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal regarding potential political interference in the merger process.
