Netflix Walks Away From Warner Bros Deal, Paramount Set to Take Over

Netflix has dropped out of the takeover battle for Warner Bros. Discovery, putting Paramount Skydance on course to win the whole WBD business.

The world's largest streaming service had been pegged to land a deal in which it would acquire Warner Bros., HBO, and HBO Max in a cash-and-stock deal valued at $72 billion in equity and $82.7 billion, including debt. But after Paramount submitted a final offer, valuing WBD at $111bn including debt, Netflix declined to match it.

In an announcement on Thursday, Netflix co-CEOs Ted Sarandos and Greg Peters said:

The transaction we negotiated would have created shareholder value with a clear path to regulatory approval. 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.

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 production jobs in the U.S. But this transaction was always a 'nice to have' at the right price, not a 'must have' at any price.

Netflix shares surged by 8.5% in after-hours trading, indicating relief among investors that the streaming company has not risked overpaying for Warner Bros.

Warner's board said Thursday night that it still recommends Netflix's offer, but now views Paramount's bid as "superior" – its first sign of backing for the suitor that it labeled hostile when the takeover battle began in December.

Warner Bros. CEO David Zaslav said that Paramount's offer "will create tremendous value," and that WBD was "excited about the potential of a combined Paramount Skydance and Warner Bros Discovery."

Assuming Paramount's takeover is successful, it will give its owner Larry Ellison ownership of not only Warner Bros. and HBO, but also news channels CNN and CBS News. However, the deal still needs regulatory approval, so nothing is for certain just yet.