In a significant turn of events, Netflix has opted out of the bidding war for Warner Bros. Discovery, allowing Paramount Skydance to secure its US$111 billion acquisition of the iconic Hollywood studio.
Netflix expressed confidence that its offer could have met regulatory standards and created value for shareholders, but ultimately decided not to continue escalating the bid. “We’ve always been disciplined, and at this price point to match Paramount Skydance’s latest offer, the deal has lost its financial appeal,” the company stated in an announcement on Thursday.
Instead of pursuing the acquisition, Netflix plans to focus on bolstering its own operations, dedicating approximately $20 billion to films, TV productions, and other entertainment ventures this year. Following this decision, Netflix shares surged as much as 13% in after-hours trading, signalling a positive investor response to the withdrawal. Conversely, Warner Bros. shares dipped, reflecting decreased expectations for a competitive bidding situation, while Paramount’s stock remained relatively stable.
Initially, Netflix reached an agreement valued at US$82.7 billion—including assumed debt—to acquire Warner Bros.’ studio and streaming operations last December. However, ongoing counteroffers from Paramount kept the bidding process alive, leading Warner Bros. to deem Paramount’s latest bid of US$31 per share as superior.
David Zaslav, CEO of Warner Bros., stated, “Once our board votes to adopt the Paramount merger agreement, it will generate substantial value for our shareholders. We are enthusiastic about the opportunities that a combined Paramount Skydance and Warner Bros. Discovery will create and look forward to collaborating on compelling storytelling.”
Netflix’s choice to step back “has cleared the way for shareholders to receive significantly higher cash payouts and a clear path toward regulatory approval,” noted Ancora Holdings Group, an activist investor in Warner Bros. “This outcome is beneficial for both shareholders and the entertainment industry.”
The tussle over ownership has been contentious, with both Netflix co-CEO Ted Sarandos and Paramount CEO David Ellison visiting Washington this week to engage with lawmakers. Sarandos met with officials in the Trump administration for about an hour, while Ellison attended the State of the Union address as a guest of Republican Senator Lindsey Graham, who was also present at the White House.
Despite the excitement around the merger, Paramount will likely face scrutiny regarding the deal. A Senate Judiciary Committee hearing is scheduled for March 4 to further investigate the Warner Bros. sale, following an earlier hearing this month. New Jersey Senator Cory Booker and Massachusetts Senator Elizabeth Warren have both voiced concerns. Warren remarked, “A merger between Paramount Skydance and Warner Bros. poses a serious antitrust risk, leading to increased prices and reduced choices for American families. A few billionaires aligned with Trump are attempting to gain control over what you can watch and set prices at will.”
Netflix, a pioneer in online streaming, has attracted over 325 million subscribers globally, generating a robust revenue stream from its TV shows and movies. While traditional film and television companies like Paramount and Warner Bros. have launched their own streaming platforms, they struggle to match the subscriber counts of newer rivals as their legacy networks face declines in viewership and advertising revenue.
Paramount’s bid included Warner Bros.’ cable networks, such as CNN and TNT. The bidding process began with a private offer in September, shortly after Ellison completed the merger of his Skydance Media with Paramount, gaining control of the Paramount film studio and streaming services, as well as networks like CBS and MTV.
Warner Bros. initiated a search for offers in October, culminating in its deal with Netflix in December. Following their perceived loss in the bidding war, Paramount launched a multi-faceted strategy to strengthen its position, including a tender offer for Warner Bros. shares and a potential proxy fight at the next annual meeting.
To bolster its case, Paramount engaged with regulators and officials, including President Donald Trump, with Ellison making several trips to Capitol Hill. Paramount adapted its offer’s terms after facing rejections from Warner Bros., including personal guarantees of US$45.7 billion from a trust associated with Ellison’s father and commitments to pay Warner Bros. US$2.8 billion to compensate for terminating their agreement with Netflix, along with US$7 billion if their deal fails to secure necessary regulatory approvals.
Paramount has secured US$57.5 billion in committed debt financing for the acquisition, provided by financial giants such as Bank of America and Citigroup.
