Paramount Skydance Triumphs Over Netflix in Warner Bros Discovery Acquisition Battle

Paramount Skydance Secures Warner Bros Discovery in High-Stakes Corporate Takeover

In a dramatic conclusion to a protracted corporate saga, Paramount Skydance has emerged as the definitive winner in the intense competition to acquire Warner Bros Discovery. This victory came after streaming behemoth Netflix officially declined to increase its financial offer for the iconic Hollywood studio on Thursday, effectively withdrawing from the bidding war.

Netflix Withdraws Citing Financial Discipline

Netflix confirmed to Reuters that it was stepping away from the pursuit of Warner Bros Discovery. In a formal statement, the company explained its decision, emphasizing its commitment to fiscal responsibility. "We have always maintained a disciplined approach to acquisitions, and at the price necessary to match Paramount Skydance's latest proposal, the transaction no longer presents a financially attractive opportunity. Therefore, we are choosing not to match the Paramount Skydance bid," the statement read.

The Warner Bros board must now formally terminate the existing agreement with Netflix and officially adopt the superior offer from Paramount Skydance. Warner CEO David Zaslav expressed optimism about the pending merger in his own statement. "Once our board votes to approve the Paramount merger agreement, it will generate tremendous value for our shareholders. We are enthusiastic about the potential of a combined Paramount Skydance and Warner Bros Discovery and eagerly anticipate collaborating to create stories that resonate globally," Zaslav declared.

Paramount's Persistent and Aggressive Strategy

Paramount maintained an unwavering and aggressive pursuit of Warner Bros throughout the process, launching what industry observers described as a hostile campaign to wrest the acquisition prize from Netflix. This determined strategy successfully lured Warner Bros back to negotiation discussions last week, with Paramount presenting the possibility of an enhanced cash offer for the company.

Earlier on Thursday, Warner Bros indicated that Paramount's revised proposal of $31 per share was superior to Netflix's bid of $27.75 per share for Warner Bros' streaming services and studio assets. An anonymous Netflix adviser, speaking on condition of confidentiality, revealed that they had recommended the streaming service exit the bidding because the deal no longer made economic sense. This advice aligned with comments made by Netflix co-CEO Ted Sarandos in a February 20 interview with Fox News, where he stressed that Netflix has consistently been "very disciplined buyers."

The adviser further explained that Netflix found itself competing against a billionaire who demonstrated a willingness to pay what Netflix considered an irrational price for Warner Bros. "There is no point in playing chicken with someone who refuses to turn the wheel," the source remarked, alluding to billionaire Larry Ellison, co-founder, executive chairman, and chief technology officer of Oracle, who is also the father of Paramount CEO David Ellison.

Following Netflix's announcement that it would not raise its offer, Netflix shares experienced a significant surge, jumping more than 10% in market trading.

Regulatory Hurdles and Political Considerations

The proposed merger between Paramount and Warner Bros would unite two major Hollywood studios, two prominent streaming platforms (HBO Max and Paramount+), and two significant news operations (CNN and CBS). Despite the Ellison family's connections to former President Donald Trump, the acquisition is expected to encounter substantial antitrust scrutiny from federal regulators in Washington, various U.S. states including California, and foreign jurisdictions.

Analysts from TD Cowen noted in a research memorandum, "Approval from federal regulators appears probable given the current political climate; however, we believe it is very likely that some state regulators—most notably, California Attorney General Rob Bonta—could attempt to challenge the transaction. We also see potential for European regulators to become involved."

Bonta, a Democrat, emphasized late on Thursday that the deal is not finalized. "These two Hollywood titans have not yet cleared regulatory scrutiny—the California Department of Justice has an ongoing investigation, and we intend to conduct a vigorous review," he stated. While states possess the authority to file lawsuits to block mergers, the U.S. Department of Justice typically has the most resources to pursue such actions.

Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal have expressed concerns that approval of the deal could be influenced by political favoritism, adding another layer of complexity to the regulatory landscape.

Enhanced Financial Terms and Industry Reaction

In its revised bid, Paramount increased the termination fee it would pay if the deal fails to gain regulatory approval to $7 billion, up from $5.8 billion. Additionally, Paramount agreed to cover the $2.8 billion fee that Warner Bros would owe Netflix for abandoning their previous merger agreement.

The Ellison Trust is committing $45.7 billion in equity, an increase from the earlier $43.6 billion, backed by Larry Ellison, who also consented to provide additional funds necessary to meet Paramount's bank solvency requirements. Financial institutions Bank of America Merrill Lynch, Citi, and Apollo are supplying $57.5 billion in debt financing, up from an initial commitment of $54 billion.

Activist investor Ancora Holdings, which holds a minor stake in Warner Bros and had intensified pressure on the HBO owner to engage more extensively with Paramount, welcomed the latest offer. "Netflix's decision not to raise its $27.75 per share offer, which is less likely to include net debt adjustments, has cleared the path for shareholders to receive substantially more cash and a genuinely viable route to government approvals," Ancora stated. "This represents a win-win scenario for shareholders and the broader industry."