Netflix Backs Out of Warner Bros Discover Deal–Paramount Offer Moves Forward

Netflix has decided not to raise its offer for Warner Bros. Discovery (WBD) and is backing out of the purchase deal, according to reports.

Paramount/Skydance (PSKY) had officially submitted a superior offer for WBD, and Netflix has four days to adjust its offer, but it is walking away instead.

The new offer from PSKY raised up to $31 per share and some other incentives, including paying the $7 billion regulatory termination fee if the deal doesn’t close over regulatory issues. Plus PSKY will pay WDB’s $2.8 billion termination fee to Netflix.

Netflix Co-CEOs Ted Sarandos and Greg Peters released this statement,

“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.

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 running a fair and rigorous process. 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.”

Sarandos previously told Variety that they would walk away if the price was too high, as they don’t overpay.

“We’re super-disciplined buyers, as you probably know, we have a reputation for such so that I’m willing to walk away and let someone else overpay for things. We have a rich history of that.

It is not surprising that Netflix has chosen to save its money and move on.

In response, Warner Bros. Discovery CEO David Zaslav said,

“Netflix is a great company and throughout this process Ted, Greg, Spence and everyone there have been extraordinary partners to us. We wish them well in the future. 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 combined Paramount Skydance and Warner Bros. Discovery and can’t wait to get started working together telling the stories that move the world.”

This drove up Netflix shares in after-hours trading as investors felt the attempted purchase was too much of a stretch for the streamer/studio.

Now the deal will move forward for regulatory inspection in both the United States and Europe.

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