After Paramount Skydance (PSKY) raised its acquisition offer, Netflix (NFLX) announced it is abandoning its bid to acquire Warner Bros. Discovery’s (WBD) film and television studios, as well as its HBO Max streaming business, officially withdrawing from the bidding war. In a statement released on Thursday, Netflix explained that although the previously negotiated deal had the potential to create shareholder value and was expected to gain regulatory approval, Paramount Skydance’s superior offer made matching it financially unattractive. Consequently, Netflix decided against increasing its bid.
The market reacted positively to this decision. Following the news of Netflix’s withdrawal, its stock price rose over 9% in after-hours trading on Thursday, indicating that investors were pleased the company avoided a high-priced acquisition. Paramount Skydance’s stock also climbed more than 6%.
The bidding tug-of-war began earlier this week when Paramount Skydance increased its offer. The company raised its all-equity acquisition bid for all of Warner Bros. Discovery from $30 per share to $31 per share, utilizing an all-cash transaction structure. This surpassed Netflix’s previous offer of $27.75 per share. Unlike Netflix’s intention to acquire only specific assets, Paramount Skydance’s proposal encompasses all of Warner Bros. Discovery’s operations, including its pay-TV networks such as CNN, TBS, and TNT. Furthermore, the new proposal includes a key clause: a “breakup fee” of up to $7 billion, payable by Paramount Skydance if the proposed merger ultimately fails to receive regulatory approval. Concurrently, Paramount Skydance also agreed to cover the $2.8 billion fee Warner Bros. Discovery would incur for terminating its agreement with Netflix.
The board of Warner Bros. Discovery stated on Thursday that Paramount Skydance’s latest acquisition proposal, valued at approximately $111 billion, offers significantly greater benefits to shareholders compared to the earlier agreement with Netflix. According to procedure, following Paramount Skydance’s superior offer, Netflix originally had four business days to decide whether to revise its own proposal as a countermeasure. However, the streaming giant ultimately chose to withdraw, concluding an acquisition battle that had lasted several months and involved multiple adjusted bids from both parties.
David Zaslav, CEO of Warner Bros. Discovery, acknowledged Netflix’s cooperation throughout the process in a statement, calling its team “terrific partners” and noting that the merger agreement with Paramount Skydance, once approved by the board vote, would create immense value for shareholders. He expressed anticipation for the future potential of the combined company.
