In a stunning development, Netflix has declined to raise its bid for Warner Bros., making David Ellison’s Paramount the winner in the battle for the legendary studio.
Netflix co-CEOs Ted Sarandos and Greg Peters issued a statement on Thursday explaining their decision, which is that the deal “is no longer financially attractive” and that it has “always been a ‘nice to have’ at the right price, and not a ‘necessity’ at any cost.”
“The transaction we negotiated would have created value for shareholders with a clear path to regulatory approval. However, we have always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we decline to match Paramount Skydance’s offer,” the co-CEOs said.
“Warner Bros. is a world-class organization, and we want to thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer, and the WBD Board of Directors for running a fair and rigorous process,” they added. “We believe we would have been strong stewards of Warner Bros.” famous brands, and that our deal was going to boost the entertainment industry and maintain and create more production jobs in the United States, but that this deal was always a “nice to have” at the right price, not a “must have” at any price.
With Netflix out, Paramount’s latest offer will almost certainly be accepted by Warners’ board, which decided earlier Thursday that it was a “superior proposal” for the Netflix deal.
“We’re very excited about this,” said David Zaslav, president and CEO of Warner Bros. Discovery: “Netflix is a great company, and throughout this process, Ted, Greg, Spence and everyone there have been exceptional partners to us. We wish them well for the future.” “Once our Board of Directors votes to approve the merger agreement with Paramount, it will create tremendous value for our shareholders. We are excited about the potential of combining Paramount Skydance and Warner Bros. Discovery and can’t wait to start working together to tell stories that move the world.”
PSKY’s most recent proposal was $31 per share, but it had a number of other sweeteners, including a visa fee payable to shareholders equal to $0.25 per quarter beginning after September 30, 2026, as well as a $7 billion regulatory redemption in the event the deal does not close due to regulatory issues.
Paramount also agreed to pay the $2.8 billion termination fee that Warner Bros. will be required to pay. It pushed Netflix to terminate the existing merger agreement.
If things go as expected, Netflix will be on the receiving end of that $2.8 billion sooner rather than later. Netflix shares rose more than 10 percent in after-hours trading after the decision was announced.
“We are pleased that WBD’s board of directors unanimously affirmed the high value of our offer, which provides WBD shareholders with superior value, certainty and speed to close,” Paramount CEO David Ellison said in a statement Thursday before Netflix withdrew from the bidding.
Of course, the Paramount deal is not necessarily a sure thing. Regulators in the US and Europe still need to formally sign on, and state attorneys general will have a say as well. Politicians are already preparing to challenge the deal (Senator Elizabeth Warren on Thursday called for an “antitrust disaster”), and Ellison will likely be called before Congress to debate it.
The politics of the deal are sure to emerge.
Meanwhile, Sarandos and Peters say they will continue to pour money into content.
“Netflix’s business is healthy, strong, and growing organically, supported by our best-in-class streaming services. This year, we will invest approximately $20 billion in high-quality movies and series and expand our entertainment offerings. Consistent with our capital allocation policy, we will also resume our share repurchase program,” the co-CEOs said. “We will continue to do what we have done for more than 20 years as a public company: delight our members, grow our business profitably, and increase shareholder value at “Long term.”
