Netflix Walks Away From Warner Bros. Discovery Acquisition as Paramount Skydance Sweetens Offer
Netflix has abandoned its pursuit of Warner Bros. Discovery after Paramount Skydance raised its bid, with Netflix executives citing the deal's lack of financial appeal at the higher price.
Netflix terminated its agreement to purchase Warner Bros. Discovery's streaming and film studio operations Thursday evening. Paramount Skydance's enhanced proposal, announced Tuesday with an increased offer of $1 per share for the entire company, has positioned it as the likely acquirer of WBD's assets, which encompass Game of Thrones, DC Comics intellectual property, the HBO Max streaming platform, and cable networks CNN and TBS.
The two companies first disclosed merger plans on December 5, with Netflix committing to an equity value of $72 billion, representing an approximate total enterprise value of $82.7 billion, for a portion of WBD. NBC News reported at that time that WBD carried a total market valuation of $60 billion.
Paramount, which had reportedly pursued WBD for an extended period, launched an aggressive unsolicited takeover bid following the December announcement. On Tuesday, Paramount raised its offer to acquire all of WBD and committed to paying a $7 billion regulatory termination fee if antitrust regulations prevented the merger from closing, along with a $0.25 per share ticking fee for each quarter the transaction remains unclosed, beginning September 30.
The company also agreed to cover WBD's $2.8 billion termination fee associated with ending its Netflix arrangement.
WBD's board designated Paramount's revised proposal as "superior" on Thursday, providing Netflix a four-business-day window to match the terms. However, Netflix—which had previously demonstrated its readiness to exit deals deemed excessively costly—declined the opportunity that same day.
The transaction we negotiated would have created shareholder value with a clear path to regulatory approval. However, 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 co-CEOs Ted Sarandos and Greg Peters
The executives further characterized the WBD merger as "a 'nice to have' at the right price, not a 'must have' at any price."
Both Netflix and Paramount stock valuations have experienced declines since the merger announcement. Following Thursday's news, Netflix shares climbed more than 10 percent during after-hours trading, while Paramount shares gained 5 percent.
WBD President and CEO David Zaslav stated in remarks to The Hollywood Reporter: "Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders. We are excited about the potential of a combined Paramount Skydance and Warner Bros. Discovery and can't wait to get started working together telling the stories that move the world."
Source: Ars Technica