Paramount outguns Netflix for Warner Bros
Paramount Skydance has emerged victorious in the months-long battle for Warner Bros Discovery, after Netflix refused to raise its offer for the Hollywood giant.
The streaming group confirmed it would not match Paramount’s latest $31 (£23)-per-share bid, ending an $83bn pursuit that had threatened to reshape the entertainment sector.
“We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid,” Netflix said in a statement.
Warner Bros Discovery’s board must now formally end its agreement with Netflix and adopt Paramount’s merger deal.
Chief executive David Zaslav said the combination would create “tremendous value for our shareholders”, and described the potential of a combined Paramount Skydance and Warner as significant.
Paramount, backed by billionaire Larry Ellison and his son David Ellison, had spent months pressing its case, launching a hostile campaign and repeatedly sweetening its offer.
Just this week, Warner said Paramount’s revised $31-a-share proposal was superior to Netflix’s $27.75 bid for the studio and streaming assets.
Paramount also agreed to increase the termination fee payable if the deal were to fail to secure regulatory approval to $7bn, up from $5.8bn, and to cover the $2.8bn break fee Warner would owe Netflix.
A Netflix adviser said the company had been bidding against a buyer willing to pay a price it viewed as irrational.
“There’s no point in playing chicken with someone who won’t turn the wheel”, they said.
Netflix shares jumped over 10 per cent after confirming its walk out, as investors sighed a breath of relief following the retreat.
Regulatory battle ahead
If and when signed, the deal would unite two major Hollywood studios, two streaming platforms, HBO Max and Paramount+, and news operations including CNN and CBS under one roof.
The market dominance of an entity that scale is likely to draw intense scrutiny from regulators in the US and overseas.
TD Cowen analysts called federal approval “likely given the political environment”, but said that state regulators, particularly California’s attorney general Rob Bonta, could attempt to challenge the merger.
There is a chance that European regulators may also examine the transaction.
Bonta said late on Thursday that the deal was “not a done deal”,confirming that California’s Department of Justice has an open investigation.
Democratic senators including Elizabeth Warren and Bernie Sanders have raised concerns that political ties – the Ellisons are seen as close to President Donald Trump – could influence the regulatory process.
The Ellison Trust is committing $45.7bn in equity, backed by Larry Ellison, while Bank of America, Citi and Apollo are providing $57.5bn in debt.
Activist investor Ancora Holdings welcomed Netflix’s decision to stand down, saying it had “paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals”.
And for the streaming powerhouse, Netflix, the withdrawal from this mega deal marks a return to its long-held discipline around acquisitions.