Netflix canceled a deal to acquire the studio and streaming assets of Warner Bros. Discovery after the WBD board rejected an offer revised by Paramount and Skydance as a better alternative on Thursday.
In the first half of this week, Paramount increased its bid to acquire the entire WBD to $31 per share, compared to a previous offer of $30 per share, all in cash.
It was the most recent amendment to a series of offers that Paramount had made in recent months, and to a hostile bid to acquire the company, it has now derailed a deal between WBD and Netflix to sell the studio and streaming business of the legacy media company at $27.75 per share.
The previous week, Netflix had authorized WBD with a seven-day waiver to restart its relationship with Paramount, which led to the greater bid. Paramount is offering all of WBD, its pay-TV networks, which include CNN, TBS, and TNT.
The WBD board said in a statement on Thursday that Netflix had four business days to make changes to its own proposal in light of Paramount’s superior offer. The streaming giant’s decision to abandon it instead puts a stake through a long-running epic that involved corrected bids on both sides.
WBD CEO David Zaslav said in a statement, referring to Netflix co-CEOs Ted Sarandos and Greg Peters and CFO Spencer Neumann, “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.”
However, Netflix shares soared 10 percent in extended Thursday trading, and Paramount shares rose 5 percent. Warner Bros. Discovery stock decreased by 2 percent.
Sarandos and Peters added in a 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.”
In the recent Paramount bid, there was a $7-billion break-up fee should the planned merger fail to receive regulatory approval. The company also paid the break-up fee to WBD that would be paid to Netflix were that transaction not to materialize, amounting to $2.8 billion.
In an interview given to CNBC by Julia Boorstin last week, Sarandos stated that Netflix had provided WBD with the waiver to renegotiate with Paramount so that the shareholders could have clarity.
Sarandos stated, “Paramount had been making a ton of noise, flooding the zone with confusion for shareholders … including floating all these hypothetical offers and talking directly to the shareholders and bypassing the Warner Bros. Discovery board. So we’ve given the opportunity to get those shareholders exactly what they deserve, which is complete clarity and certainty.”
Nonetheless, Sarandos had not yet commented on whether Netflix would increase its own bid to correspond to a reinstated Paramount bid. Sarandos attended meetings at the White House to discuss the potential tie-up on Thursday.
Netflix co-CEOs said in their statement, “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.”
He reported, “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.,” they said. “But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
