Netflix has opted not to pursue a deal to acquire Warner Bros. Discovery’s (WBD) studio and streaming assets. The decision follows WBD’s board deeming a revised offer from Paramount Skydance superior. Paramount recently increased its bid for WBD to $31 per share, all cash, topping its previous offer of $30 per share. This latest bid has displaced a prior agreement with Netflix, which was set at $27.75 per share.
Earlier in the week, Netflix provided WBD with a seven-day waiver to reconsider its negotiations with Paramount, allowing the latter to present a more attractive financial proposal. Paramount’s bid includes the entirety of WBD, encompassing its pay-TV networks such as CNN, TBS, and TNT.
WBD CEO David Zaslav expressed gratitude toward Netflix’s leadership, emphasizing the potential for value creation with the Paramount merger. Netflix’s co-CEOs, Ted Sarandos and Greg Peters, stated that while they believed their proposed transaction could have generated shareholder value, the financial outlook of matching Paramount’s offer was unappealing. As the news broke, Netflix’s stock rose 10% in after-hours trading, while Paramount’s shares gained 5%, and WBD saw a 2% drop.
The revised Paramount offer also includes a $7 billion breakup fee in case of regulatory setbacks, as well as a commitment to cover a $2.8 billion breakup fee owed to Netflix if their agreement does not materialize.
Sarandos noted that Paramount had created confusion for shareholders through direct communication, thus prompting the waiver to ensure clarity in the negotiation process.
Why this story matters:
- Changes in major media ownership can significantly affect industry dynamics and content creation.
Key takeaway:
- Netflix withdrew its bid due to financial considerations after Paramount Skydance made a more compelling offer to acquire WBD.
Opposing viewpoint:
- Some may argue that a Netflix acquisition could have strengthened the entertainment industry and preserved U.S. production jobs.
