Netflix exits bidding war as Warner Bros. Discovery declares Paramount’s offer superior

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Warner Bros. Discovery has designated the most recent takeover proposal from Paramount Skydance as a “superior” offer compared to its current arrangement with Netflix, intensifying one of Hollywood’s most significant bidding contests in recent memory. This decision led Netflix to exit the competition, effectively awarding the victory to Paramount.

In a statement released on Thursday, Warner Bros. Discovery announced that its board had determined Paramount’s updated all-cash bid to acquire the full company meets the criteria of a “Company Superior Proposal” as defined in its merger agreement with Netflix. The offer places a value of approximately $111 billion on Warner Bros. Discovery, equating to $31 per share. This is an increase from Paramount’s prior proposal of $30 per share and substantially exceeds the financial terms of the $83-billion agreement with Netflix that was revealed in December.

Warner Bros. Discovery formally informed Netflix that Paramount’s bid is now considered superior, which officially initiates a contractual period allowing Netflix to propose amendments to its own deal to try and regain the superior designation.

Richer price, heavier protections

Paramount’s bid is notable not only for its headline valuation but also for the safeguards it provides to give Warner Bros. Discovery and its investors greater confidence. The terms feature a $7 billion reverse termination fee should regulators prevent the deal, an assurance to cover the multibillion-dollar breakup fee Warner Bros. Discovery would owe Netflix if that agreement is called off, and a “ticking fee” of 25 cents per share each quarter if the finalization of the deal is delayed past the autumn.

Paramount has also removed previous stipulations related to the performance of Warner Bros. Discovery’s cable assets and has promised to supply extra equity if necessary to appease lenders. These actions are designed to minimize the risk associated with completing the transaction. Supported by David Ellison and a financing plan that merges approximately $45 billion–$46 billion in equity with over $57 billion in debt, the bid constitutes a forceful attempt to acquire one of Hollywood’s most prestigious studios completely.

Investors in Netflix had voiced apprehensions regarding the scale, strategic alignment, and potential regulatory hurdles of the proposed Warner Bros. Discovery acquisition. Perceived by the market as a “deal stock,” a term S&P Global’s Melissa Otto used previously, Netflix’s share price has risen since Paramount increased its offer, as the market reacted positively to the possibility of Netflix avoiding the deal and not taking on traditional Hollywood assets.

Regulatory concerns present a significant challenge for Paramount’s offer, which is framed as a more conventional merger of studios and networks. Nevertheless, the combined entity would become a media powerhouse with scale comparable to Disney and Comcast’s NBCUniversal.

The acquisition struggle has also drawn political scrutiny. President Donald Trump initially stated he would participate and complimented Netflix Co-CEO Ted Sarandos, but later said he would not be involved, and has recently expressed anger over remarks from a former Obama administration official who serves on Netflix’s board. Concurrently, the Ellison family is currently under scrutiny, despite David Ellison’s assertion in December that he would maintain a stance if the Ellisons are regarded as his friends.

This report has been updated with news of Netflix’s withdrawal.