Netflix walks away from a purchase agreement Warner Bros. Discovery studio and streaming assets after WBD’s board on Thursday ruled on a revised bid by Paramount Skydance be a superior offer.
Earlier this week, Paramount increased its offer to purchase 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 launched a hostile bid to buy the company — and it has now canceled a deal between WBD and Netflix to sell the former media company’s studio and streaming businesses for $27.75 per share.
Last week, Netflix granted WBD a seven-day waiver to re-engage with Paramount, resulting in a higher offer. Paramount’s offering covers 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, WBD’s board said in a statement Thursday.
Instead, the streaming giant’s decision to pull out brings to an end a long-running saga that saw offers changed from both bidders.
“Netflix is a great company and throughout this process, Ted, Greg, Spence and everyone else have been extraordinary partners to us. We wish them well for the future,” WBD CEO David Zaslav said in a statement, referring to Netflix co-CEOs Ted Sarandos and Greg Peters, as well as CFO Spencer Neumann. “Once our board votes to adopt the merger agreement with Paramount, it will create significant value for our shareholders. We are excited about the potential of a combination of Paramount Skydance and Warner Bros. Discovery and can’t wait to start working together to tell the stories that move the world.
Netflix stock rose 10% in extended trading Thursday, while Paramount stock gained 5%. Warner Bros. shares Discovery fell 2%.
“The transaction we negotiated would have created shareholder value 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 decline to match Paramount Skydance’s offer.”
Paramount’s latest offer included a $7 billion breakup fee in case the proposed merger fails to gain regulatory approval. The company also agreed to pay the $2.8 billion breakup fee WBD would owe Netflix if that deal doesn’t go through.
Sarandos told CNBC’s Julia Boorstin in an interview last week that Netflix granted WBD the waiver to reopen negotiations with Paramount to give shareholders more clarity.
“Paramount had made a lot of noise, flooding the area with confusion for shareholders…including launching all these hypothetical offers, talking directly to shareholders and bypassing the Warner Bros. Discovery board,” Sarandos said at the time. “So we have given these shareholders the opportunity to get exactly what they deserve, which is complete clarity and certainty.”
However, Sarandos has not yet said whether Netflix will increase its own offer to match a revised offer from Paramount.
And on Thursday, Sarandos attended meetings at the White House to discuss a possible rapprochement.
“Warner Bros. is a world-class organization, and we want to thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer and the WBD Board of Directors for conducting a fair and rigorous process,” the 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 United States,” they said. “But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”