Why Netflix dropped its Warner takeover chase: Deal details explained

Dubai: Netflix has decided not to raise its offer for Warner Bros. Discovery, stepping out of a takeover battle that now leaves Paramount Skydance in pole position to secure control of the historic Hollywood studio.

Warner’s board informed Netflix that Paramount Skydance’s latest proposal qualifies as a “Superior Proposal” under the terms of its existing merger agreement. Netflix responded by confirming it would not match the revised bid.

The decision ends months of deal manoeuvring that had drawn attention from investors, regulators and lawmakers in Washington.

Netflix co-CEOs Ted Sarandos and Greg Peters said the company weighed the economics of the transaction against its broader capital strategy.

“The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” they said. “However, we've always been disciplined, and at the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid.”

Executives described Warner as an attractive asset but not one worth pursuing at any cost.

“But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price,” the statement added.

Netflix reiterated confidence in its standalone growth strategy. “Netflix's business is healthy, strong and growing organically, powered by our slate and best-in-class streaming service. This year, we'll invest approximately $20 billion in quality films and series and will expand our entertainment offering. Consistent with our capital allocation policy, we'll also resume our share repurchase program.”

Paramount offer gains board backing

Paramount Skydance’s proposal values Warner Bros. Discovery at $31 per share in cash for the entire company. According to a Bloomberg report, the offer represents part of a transaction valued at about $111 billion including debt.

David Ellison, Chairman and CEO of Paramount, welcomed the board’s assessment.

“We are pleased WBD's Board has unanimously affirmed the superior value of our offer, which delivers to WBD shareholders superior value, certainty and speed to closing,” he said.

Paramount’s proposed agreement includes a $45.7 billion equity commitment backed by Larry Ellison and a $57.5 billion debt financing package from Bank of America, Citi and Apollo. The company has also committed to pay Warner’s $2.8 billion termination fee owed to Netflix and to cover a $7 billion regulatory termination fee if the deal fails due to antitrust hurdles.

The Hart-Scott-Rodino waiting period applicable to the acquisition expired earlier this month, clearing one procedural step.

Market reaction and political scrutiny

Bloomberg reported that Netflix shares jumped in after-hours trading following the announcement, reflecting investor approval of management’s decision to avoid escalating the bidding war. Warner Bros. shares declined, while Paramount’s stock showed limited movement.

The contest has drawn political attention in Washington, where lawmakers have raised concerns about competition and media concentration. Senate hearings are scheduled to examine the proposed merger, and critics have warned about potential effects on pricing and consumer choice.

Warner Bros. CEO David Zaslav signalled optimism about the Paramount tie-up, saying the combined company could create significant shareholder value and strengthen its storytelling capabilities.