Netflix walks out of Warner Bros Discovery deal, clears path for Paramount Skydance — ‘No longer financially attractive’

Netflix has dropped out of the deal to acquire Warner Bros Discovery after the WBD board on Thursday determined that Paramount Skydance's bid was the superior offer.

Netflix's pullout from the deal — which faced a months-long three-pronged dilemma over who would acquire WBD's studio and streaming assets — clears the path for Paramount Skydance to gain control of Warner Bros Discovery in a $111 billion historic deal.

“The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” Netflix said in a statement on Thursday.

However, it said that it was declining to match Paramount Skydance's latest offer.

“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.”

In December last year, streaming giant Netflix inked an $82.7 billion deal, including assumed debt, to acquire Warner Bros. Discovery. However, Paramount Skydance kept offering repeated bids. Last week, Netflix granted the historic Hollywood studio a seven-day period to engage in talks with Paramount Skydance, which led to a higher offer and the subsequent outcome.

What does the Paramount-WBD deal look like?

The Paramount-WBD deal puts a constellation of media properties - from CNN to Nickelodeon to HBO - under the control of the family led by Oracle tycoon and White House ally Larry Ellison.

Earlier in the day, Warner Bros. Discovery announced it would decline Netflix's offer.

“Netflix is a great company and throughout this process Ted, Greg, Spence and everyone there have been extraordinary partners to us. We wish them well in the future,” WBD CEO David Zaslav said in a statement, referring to Netflix co-CEOs Ted Sarandos and Greg Peters and CFO Spencer Neumann.

The company said that its deal with Paramount Skydance will create better value for its shareholders.

“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.”

Without a Netflix counteroffer, the Warner Bros. Discovery board is now free to terminate its agreement with the streaming giant and proceed with Paramount.

Deal may face regulatory issues

Paramount's merger with Warner Bros would unite two major Hollywood studios, two streaming platforms (HBO Max and Paramount) and two news operations (CNN and CBS).

The Ellisons have connections to US President Donald Trump. Still, the bid is likely to face antitrust scrutiny in Washington, in foreign countries and US states, including California.

Democratic Senators Elizabeth Warren, Bernie Sanders and Richard Blumenthal have worried that approval of the deal could be tainted by political favouritism.

In its revised bid, Paramount raised the termination fee it would pay to WBD should the deal fail to gain regulatory approval to $7 billion from $5.8 billion.

Paramount also promised to give Warner Bros. $2.8 billion to pay Netflix for terminating their agreement.