Paramount clinches Warner Bros deal after Netflix walks away; paramount takeover advances

Netflix has backed away from its proposal to buy Warner Bros Discovery, clearing the way for Paramount Skydance to win a months-long battle for the studio in a deal worth around $110bn (£81. 7bn). Netflix executives said they declined to match the rival bid because "the deal is no longer financially attractive" at that price, and the company refused to raise its offer.

Netflix withdraws its bid

Last December, Warner Bros agreed to a takeover offer from Netflix for some of its assets in a transaction worth roughly $82bn (£61bn) including debt. Netflix declined to increase its proposal this week after Warner Bros declared Paramount Skydance’s new offer was "superior, " and Netflix executives said they would not match the higher price.

Paramount's improved offer

Paramount initially made a rival proposal that was rebuffed by Warner Bros, but Paramount then increased its bid earlier this week, boosting the offer by $1 per share. This week Paramount sweetened its offer to buy all of Warner Bros Discovery, including its struggling cable business, raising its per-share proposal from $30 to $31.

Netflix executives' statement

Netflix co-chief executives Ted Sarandos and Greg Peters said: "The transaction we negotiated would have created shareholder value with a clear path to regulatory approval. " They added, "However, we've always been disciplined. " In a further statement they said the price required to match Paramount Skydance’s latest offer made "the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid. " The executives also warned that "This transaction was always a 'nice to have' at the right price, not a 'must have' at any price. "

Market reaction and stock moves

Wall Street reacted strongly to Netflix's decision. Shares of the streaming giant were up nearly 10% in after-hours trading, trading at more than $92, after the company declined to increase its offer. Netflix's stock had closed Thursday at $84. 59. The company’s shares had fallen sharply since it announced the original deal to buy parts of Warner Bros Discovery.

Assets, risks and regulatory hurdles

The buyer would gain control of the iconic studio along with its films and media networks, a takeover that could significantly reshape the media landscape. Warner Bros controls the rights to the DC Comics library, the "Harry Potter" film and television rights, as well as HBO. Investors had been skeptical about Netflix's plan to buy the studio and its streaming arm because of the high cost and the move into theatrical distribution beyond its core business.

Regulatory review and political scrutiny

The announcement came just hours after Ted Sarandos visited the White House on Thursday. California Attorney General Rob Bonta said later on Thursday that the potential merger "is not a done deal. " Bonta wrote that "These two Hollywood titans have not cleared regulatory scrutiny - the California Department of Justice has an open investigation, and we intend to be vigorous in our review. " He had said earlier this month that his office would review any deal involving Warner Bros because the entertainment industry represents a "critical sector" for California's economy. Paramount would also need approval from the US Department of Justice as well as European regulators.

Strategic stakes and ownership

Paramount is seeking to transform itself into a Hollywood heavyweight and is backed by tech billionaire Larry Ellison; the company is led by his son David. A deal between Paramount and Warner Bros could hold serious ramifications for the future of, because Warner Bros is 's parent company.

Warner Bros put itself up for sale last year, and the months-long saga now moves to regulatory review and potential clearance decisions that will determine whether Paramount Skydance can complete the takeover.