Netflix drops bid for Warner Bros., leaving Paramount the winner
Netflix Inc. dropped out of the fight to buy Warner Bros. Discovery Inc., clearing the way for rival bidder Paramount Skydance Corp. to clinch its US$111 billion deal for the historic Hollywood studio.
The streaming industry leader said that while it believed its deal would have passed muster with regulators and created shareholder value, it didn’t want to keep bidding.
“We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive,” Netflix said Thursday in a statement. Instead, it will keep investing in its business, including about US$20 billion this year on films, TV shows and other entertainment offerings.
Netflix shares jumped as much as 13 per cent in after-hours trading, indicating that investors were happy to see the company walk away from the deal. Warner Bros. fell, with investors no longer anticipating a bidding war. Paramount shares were little changed.
Netflix inked an US$82.7 billion deal, including assumed debt, to acquire the studio and streaming businesses of Warner Bros. in December, but repeated counteroffers from Paramount for the entire company kept the auction open. Late Thursday, Warner Bros. deemed Paramount’s latest US$31-a-share bid the superior offer.
“Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders,” Warner Bros. chief executive David Zaslav said in a statement. “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.”
Netflix’s decision not to raise its offer “has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals,” Ancora Holdings Group, an activist investor in Warner Bros., said in a statement. “This is a win-win for shareholders and the industry.”
The takeover fight has been contentious, in Hollywood and in Washington. Both Netflix co-Chief Executive Officer Ted Sarandos and Paramount chief executive David Ellison made pilgrimages to the U.S. capital this week to meet with lawmakers.
Sarandos spent about an hour on Thursday with officials in the Trump administration.
“I’m not doing press today,” he said upon leaving the White House.
Ellison attended Trump’s State of the Union address on Tuesday as a guest of Lindsey Graham, a Republican Senator from South Carolina. Graham was also seen at the White House on Thursday.
Paramount will face ongoing scrutiny for its deal. The U.S. Senate Judiciary Committee had scheduled a hearing for March 4 to once again examine the Warner Bros. sale following a hearing earlier this month. New Jersey Senator Cory Booker, a Democrat, once again extended an invitation for Ellison to attend.
Elizabeth Warren, a Massachusetts Democrat, also weighed in on the Paramount deal. “A Paramount Skydance-Warner Bros. merger is an antitrust disaster threatening higher prices and fewer choices for American families,” she said in a statement. “A handful of Trump-aligned billionaires are trying to seize control of what you watch and charge you whatever price they want.”
Netflix, an early mover in online TV, has built up a profitable business with more than 325 million consumers around the globe paying a monthly subscription for its TV shows and movies.
Legacy film and TV producers like Paramount and Warner Bros. have launched their own streaming businesses, but lack the subscriber base of rivals as their traditional networks lose viewers and advertisers.
Paramount’s offer included Warner Bros. cable-TV networks like CNN and TNT. The company kicked off the bidding with a private offer in September. That was just one month after Ellison closed on the merger of his Skydance Media with Paramount, giving him control of the Paramount film studio, streaming service and TV networks like CBS and MTV.
Warner Bros. began soliciting offers for the business in October before finalizing the deal with Netflix in December.
After apparently losing the fight, Paramount launched a multipronged campaign to get back in the game. The company began a tender offer for Warner Bros. shares and threatened a proxy fight at the next annual meeting. The company lobbied regulators and politicians including President Donald Trump, with Ellison making multiple trips to Washington to make his case.
Paramount made adjustments to the terms of its offer after repeated rejections by Warner Bros. Those included personal guarantees on US$45.7 billion in equity from a trust created by Ellison’s father, Oracle Corp. Chairman Larry Ellison, one of the world’s richest men and a Trump ally.
Paramount also promised to give Warner Bros. US$2.8 billion to pay Netflix for terminating their agreement and to pay Warner Bros. US$7 billion if its deal fails to win required regulatory approvals.
Paramount said Thursday it has US$57.5 billion of debt financing committed for the deal, provided by Bank of America Corp. , Citigroup Inc. and Apollo Global Management Inc. The three firms had previously committed US$54 billion.
With assistance from Josh Sisco, Liana Baker, Jennifer A. Dlouhy, Dan Wilchins and Diasia Robinson