Netflix announced Thursday it is backing out of its deal to merge with Warner Bros. Discovery after Warner's board said a counteroffer from Paramount Skydance was "superior."
The board's decision triggered a four-day window for Netflix to revise its offer. But the streaming company said in a news release that it declined to raise its bid.
"The transaction we negotiated would have created shareholder value with a clear path to regulatory approval," Netflix CEOs Ted Sarandos and Greg Peters said in the release. "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 December, Netflix and Warner Bros. Discovery announced a merger agreement under which Netflix would acquire Warner's film and television studios, HBO/HBO Max, DC Entertainment, and other key studio and intellectual property assets for about $82.7 billion.
Paramount Skydance launched a hostile bid for Warner Bros. Discovery, raising its offer this week to $31 per share, or about $111 billion.
Paramount also offered a $7 billion regulatory termination fee if the deal fails to close for regulatory reasons and agreed to cover the $2.8 billion breakup fee Warner Bros. Discovery would owe Netflix if it exited the agreement.
Paramount's proposal also includes a commitment from Oracle founder Larry Ellison to provide additional funding if needed to satisfy solvency requirements from the company's lending banks.
Ellison is the father of Paramount Skydance CEO David Ellison, a Hollywood producer, and largely financed his son's takeover of Paramount and the subsequent bid for Warner Bros. Discovery. Larry Ellison is also a longtime ally of President Donald Trump.
"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," David Ellison said in a statement.
There were concerns about whether the Netflix-Warner merger would harm competition in the entertainment industry. The Department of Justice opened an investigation into whether the deal "may substantially lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act or Section 2 of the Sherman Act," according to a copy of a civil investigative demand reviewed by Bloomberg News.
A coalition of 11 Republican state attorneys general also asked the DOJ to scrutinize the proposed merger, warning it "will likely result in undue market concentration that stifles competition and therefore creates higher prices, lower reliability, and less innovation for one of America's major industries, all to the detriment of American consumers."
"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.," Sarandos and Peters said. "But this transaction was always a 'nice to have' at the right price, not a 'must have' at any price."
Michael Katz ✉
Michael Katz is a Newsmax reporter with more than 30 years of experience reporting and editing on news, culture, and politics.
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