Paramount Skydance has successfully acquired Warner Bros Discovery after a prolonged bidding war. The acquisition comes following Netflix’s decision not to increase its offer for the renowned Hollywood studio. Netflix stated, “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.”

Netflix confirmed to Reuters that it would withdraw from its bid for Warner Bros Discovery. The Warner Bros board is required to terminate its agreement with Netflix and proceed with Paramount Skydance’s offer. Warner CEO David Zaslav expressed enthusiasm, stating, “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.”

Paramount’s aggressive pursuit included a hostile campaign to reclaim Warner Bros from Netflix, eventually leading Warner Bros back to negotiations with an improved cash offer. Warner Bros had earlier announced that Paramount’s revised offer of $31 per share was more favorable compared to Netflix’s $27.75 per share bid for the studio and streaming assets.

An adviser for Netflix, who wished to remain anonymous, advised the company to exit the bidding process, citing the economic impracticality of further raising its offer. Netflix co-CEO Ted Sarandos had previously hinted at this decision in a February 20 interview with Fox News’ Liz Claman, emphasizing Netflix’s disciplined approach to acquisitions. The adviser noted that Netflix was competing against billionaire Larry Ellison, who showed a willingness to pay a price that Netflix considered unreasonable. “There’s no point in playing chicken with someone who won’t turn the wheel,” the source remarked, referencing Ellison, co-founder of Oracle and father of Paramount CEO David Ellison.

Following Netflix’s decision, the company’s shares rose by more than 10%.

Regulatory Concerns

The merger between Paramount and Warner Bros would combine two major Hollywood studios, two streaming platforms (HBO Max and Paramount+), and two news operations (CNN and CBS). Despite the Ellisons’ connections to President Donald Trump, the deal is expected to face antitrust scrutiny in the United States and abroad, particularly in California.

“Approval from federal regulators seems likely given the political environment; however, we think it is very likely that some state regulators – most notably, California Attorney General Rob Bonta – could attempt to challenge the deal. We think there is potential for European regulators to have a say as well,” TD Cowen analysts commented in a note.

California Attorney General Rob Bonta, a Democrat, stated that the deal is not yet finalized and that the California Department of Justice has an ongoing investigation. “These two Hollywood titans have not cleared regulatory scrutiny — we intend to be vigorous in our review,” he added. States have the authority to challenge deals, though the Department of Justice has the most significant resources to do so.

Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal have expressed concerns that political favoritism could influence the deal’s approval.

As part of its revised offer, Paramount increased the termination fee to $7 billion from $5.8 billion should the deal not obtain regulatory approval. Additionally, it agreed to cover the $2.8 billion fee Warner Bros would owe Netflix for terminating their merger agreement.

The Ellison Trust has committed $45.7 billion in equity, up from a previous $43.6 billion, backed by Larry Ellison. He has also agreed to provide additional funds to meet Paramount’s bank solvency requirements. Bank of America Merrill Lynch, Citi, and Apollo are providing $57.5 billion in debt financing, an increase from an earlier $54 billion commitment.

Ancora Holdings, an activist investor with a minor stake in Warner Bros, welcomed the updated offer. “Netflix’s decision to not raise its offer of $27.75, less likely net debt adjustments, has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals,” Ancora stated. “This is a win-win for shareholders and the industry.”

Reporting by Aditya Soni, Akash Sriram, Jaspreet Singh, and Sneha S K in Bengaluru and Dawn Chmielewski in Los Angeles; Editing by Shinjini Ganguli and David Gregorio.