netflix is walking away from a deal to buy Warner Bros. Discovery studio and broadcast assets after WBD’s board on Thursday considered a revised offer by supreme skydance be a superior offer.
Earlier this week, Paramount raised its offer to buy all of WBD to $31 per share, up from $30 per share, all in cash. It was the latest amendment to Paramount’s multiple bids in recent months, and since it moved forward with a hostile bid to buy the company, and has now unseated a deal between WBD and Netflix to sell the legacy media company’s studio and streaming businesses for $27.75 per share.
Last week, Netflix granted WBD a seven-day waiver to reengage with Paramount, resulting in a higher offer. Paramount’s offer concerns the entirety of WBD, including its pay-TV networks such as CNN, TBS and TNT.
Netflix had four business days to make changes to its own proposal in light of Paramount’s superior offer, the WBD board said in a statement Thursday.
Instead, the streaming giant’s decision to pull out puts an end to a protracted saga that saw both bidders’ offers altered.
“Netflix is a great company and throughout this process Ted, Greg, Spence and everyone here have been extraordinary partners for us. We wish them the best 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. “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 combination of Paramount Skydance and Warner Bros. Discovery and look forward to working together telling the stories that move the world.”
Netflix shares rose 10% in extended trading Thursday, while Paramount shares gained 5%. Shares of Warner Bros. Discovery fell 2%.
“The transaction we negotiated would have created value for shareholders with a clear path to regulatory approval,” Sarandos and Peters said in a statement. “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 refuse to match Paramount Skydance’s offer.”
Paramount’s latest offer included a $7 billion breakup fee in case the proposed merger fails to win regulatory approval. The company also agreed to pay the $2.8 billion breakup fee that WBD would owe Netflix if that deal fell through.
Sarandos told CNBC’s Julia Boorstin in an interview last week that Netflix granted WBD the waiver to reopen Paramount talks in order to give clarity to shareholders.
“Paramount had been making a lot of noise, flooding the area with confusion for shareholders…including floating all these hypothetical offers and talking directly to shareholders and bypassing the Warner Bros. Discovery board,” Sarandos said at the time. “So we’ve given them the opportunity to give those shareholders exactly what they deserve, which is complete clarity and certainty.”
However, Sarandos had not commented on whether Netflix would raise its own offer to match a revised offer from Paramount.
And on Thursday, Sarandos attended meetings at the White House to discuss the possible alliance.
“Warner Bros. is a world-class organization and we want to thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer and the WBD Board for conducting a fair and rigorous process,” Netflix co-CEOs said in their statement.
“We believe we would have been strong stewards of Warner Bros.” iconic brands, and that our deal would have strengthened the entertainment industry and preserved and created more manufacturing jobs in the U.S.,” they said. “But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
