Netflix dropped out of the fight to buy Warner Bros Discovery, clearing the way for rival bidder Paramount Skydance to clinch its $111 billion deal for the historic Hollywood studio.
The streaming industry leader said that, while it believed its deal would have been approved by regulators and created shareholder value, it did not 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 in a statement on Thursday. Instead, it will continue to invest in its business, including about $20 billion this year on films, TV shows and other entertainment.
Netflix shares jumped more than 13 per cent in after-hours trading, indicating that investors were happy for the company to walk away from the deal. Warner Bros fell, with investors no longer anticipating a bidding war. Paramount shares changed little.
Netflix signed an $82.7 billion deal, including assumed debt, to acquire the studio and streaming businesses of Warner Bros in December, but repeated counter-offers from Paramount for the entire company kept the auction open. Late Thursday, Warner Bros deemed Paramount’s latest $31-a-share bid to be the superior offer.
“I am extremely proud of the rigorous process this board has run over the past five and a half months that has led us to the cusp of combining these two storied companies and the excitement it will bring to audiences for many years to come,” Warner Bros chairman Samuel DiPiazza Jr said in statement.
Netflix’s decision to refrain from increasing 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 Ted Sarandos and Paramount chief executive David Ellison travelled to the US capital this week to meet politicians.
Mr Sarandos spent about an hour on Thursday with officials President Donald Trump's administration. Mr Ellison, meanwhile, attended Mr Trump’s State of the Union address on Tuesday as a guest of Republican senator Lindsey Graham, who was also at the White House on Thursday.
Paramount will face scrutiny over its deal. The US Senate judiciary committee has 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 Mr Ellison to attend.
Another Democratic senator, Elizabeth Warren, called the proposed Paramount Skydance-Warner Bros merger "an antitrust disaster threatening higher prices and fewer choices" for families. “A handful of Trump-aligned billionaires are trying to seize control of what you watch and charge you whatever price they want," she added.
Netflix 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 such as Paramount and Warner Bros have launched 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 including CNN and TNT. The company began the bidding with a private offer in September. That was a month after Mr Ellison completed the deal to merge his Skydance Media with Paramount, giving him control of the Paramount film studio, streaming service and TV networks including CBS and MTV.
Warner Bros began soliciting offers for the business in October before finalising 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 Mr Trump, with Mr Ellison making 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 $45.7 billion in equity from a trust created by Ellison’s father, Oracle chairman Larry Ellison, one of the world’s richest men and a Trump ally.
Paramount also promised to give Warner Bros $2.8 billion to pay Netflix for terminating their agreement, while it will also pay Warner Bros $7 billion if its deal fails to receive regulatory approval. Paramount said on Thursday that it has $57.5 billion of debt financing committed for the deal, provided by Bank of America, Citigroup and Apollo Global Management. The three firms had previously committed $54 billion.
