Netflix has officially opted out of a proposed acquisition of Warner Bros. Discovery’s studio and streaming assets following the board’s decision to accept a superior offer from Paramount Skydance. Paramount increased its bid to $31 per share in cash, surpassing Netflix’s offer of $27.75 per share, which had been on the table for some time.
This latest development is part of a series of bids made by Paramount as it attempts to acquire not just Warner Bros. Discovery’s streaming platforms but its entire operation, which includes its pay-TV networks like CNN, TBS, and TNT. Previously, Netflix had allowed WBD a seven-day waiver to engage with Paramount, which led to this revised offer.
Despite having the opportunity to counter Paramount’s bid over a specified period, Netflix chose not to adjust its proposal. The strategic move to withdraw marks a significant moment in the protracted negotiations, during which both companies had submitted multiple offers to WBD.
Following the announcement, Netflix’s stock experienced a 10% increase in after-hours trading, signaling investor confidence in the company’s decision. Conversely, Paramount’s stock rose by 5%, while shares of Warner Bros. Discovery dipped by 2%.
The co-CEOs of Netflix, Ted Sarandos and Greg Peters, expressed their disappointment at the outcome, noting the potential value the negotiated deal could have brought to shareholders and the likelihood of obtaining regulatory approval. They emphasized that while they viewed the acquisition as an attractive opportunity, it had to be at the right price, and Paramount’s bid no longer made financial sense for them.
Paramount’s offer also included a significant $7 billion breakup fee, which would come into play if the merger fails to secure regulatory approval. Additionally, they agreed to cover the $2.8 billion breakup fee that Warner Bros. Discovery would owe Netflix should their agreement collapse.
In a previous interview, Sarandos highlighted the competitive environment created by Paramount’s approach, which involved direct communications with WBD shareholders, suggesting that clarity was needed for their interests. He acknowledged the strength and reputation of Warner Bros. Discovery, thanking its executives for facilitating an open and fair evaluation process.
Although Netflix’s decision to withdraw from the bidding is notable, the company remains focused on exploring innovative strategies and opportunities in the entertainment landscape, reinforcing their commitment to quality and shareholder value.