Paramount beats Netflix to acquire Warner Bros. for $31 per share in cash

Netflix has abandoned its agreement to acquire Warner Bros, HBO and the HBO Max streaming service for $83 billion. In a statement released Thursday, CEOs Ted Sarandos and Greg Peters announced that the company will not match the new offer presented by Paramount, which has proven to be more financially attractive to Warner Bros Discovery.

“The transaction we negotiated would have created value for shareholders with a clear path to regulatory approval. However, we have always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive,” the executives said in their statement.

Netflix CEOs added that they believed they would have been “good stewards of Warner Bros.’ iconic brands” and that their deal would have strengthened the entertainment industry and preserved production jobs in the United States. However, they made it clear that this acquisition was always “something desirable at the right price, not something essential at any price.”

How Paramount won the battle for Warner Bros.

Although Warner agreed to merge with Netflix last December, Paramount, led by David Ellison, returned with a hostile offer to take over the entire company, not just specific parts as Netflix proposed. This more aggressive strategy sparked a bidding battle that even led to legal action.

After multiple rounds of negotiations and mounting pressure, WBD finally gave Paramount one last opportunity to present its “best and final offer.” In January, Netflix had revised its acquisition proposal to make it an all-cash deal, trying to counter pressure from its competitor. Ted Sarandos even testified before the Senate in early February to address concerns about this mega-merger.

However, Paramount’s final offer turned out to be more compelling. WBD stated that the proposal $31 per share in cash from Paramount represents a “superior” offer compared to the terms previously negotiated with Netflix.

The million-dollar penalties of the new agreement

The agreement between Paramount and Warner Bros Discovery includes very relevant financial conditions that protect both parties. Paramount agrees to cover a $7 billion regulatory termination penalty in case the deal does not close due to approval problems by antitrust authorities.

In addition, Paramount must pay Netflix a penalty for breaking the contract. 2.87 billion dollars as compensation for abandoning the previously established agreement. This figure reflects the legal, due diligence and opportunity costs that Netflix had invested in the operation for months.

The agreement also provides for a “progressive fee” provision of $0.25 per quarter that will begin accruing after September 30, 2026 until the transaction with Paramount is completed. This mechanism seeks to encourage the rapid closing of the agreement and compensate for any delay in the completion of the operation.

With this decision, Netflix maintains its strategy of organic growth and selective acquisitions, avoiding committing to an operation that, at the final price required, did not meet its profitability criteria. Meanwhile, Paramount is moving towards consolidating one of Hollywood’s most iconic studios.