Netflix has announced that it is pulling back from its plans to acquire Warner Bros. Discovery. In a press release, the company has confirmed that it will not be raising its offer to match what Paramount Skydance is offering, referring to it as being a “Superior Proposal” when compared to the existing deal Warner Bros. Discovery had signed with Netflix. The reason, according to Netflix co-CEOs Ted Sarandos and Greg Peters, is that the deal is no longer “financially attractive” if the company is forced to match Paramount’s offer.
“The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” said the CEOs in a statement. “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.”
Despite its pull back from the deal, Netflix went on to praise Warner Bros. Discovery’s leadership—namely David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer, and the company’s board for its “fair and rigorous process”. The streaming giant went on to note that the acquisition was considered a “nice to have” if the price were right, and not a “‘must have’ at any price”.
Moving forward, Netflix has confirmed plans to invest around $20 billion in films and shows to expand its streaming offerings. It will also resume its share repurchase program.
The original deal that Netflix and Warner Bros. Discovery had agreed upon for the acquisition was valued at around $82.7 billion, with equity valued at $72 billion being part of the process. Rather than acquiring the entirety of Warner Bros. Discovery, however, Netflix was prioritizing its film and television studios, along with the HBO Max and HBO IPs.
Interestingly, the deal had made no mention of the various game studios part of Warner Bros. Discovery. Peters had said back in December that the gaming companies weren’t mentioned due to them being a “relatively minor” part of the deal in the grand scheme of things. Despite this, however, he also noted excitement to work with WB Games, saying that there is “definitely an opportunity there.”
“And maybe worth going back again to sort of how we thought about the deal and building our valuation model, while they definitely have been doing some great work in the game space, we actually didn’t attribute any value to that from the get-go because they’re relatively minor compared to the grand scheme of things,” said Peters. “Now we are super excited because some of those properties that they’ve built, Hogwarts Legacy is a great example of that, have been done quite well, and we think that we can incorporate that into what we’re offering. They’ve got great studios and great folks working there. So we believe that there’s definitely an opportunity there. But just to be clear, we haven’t built that into our deal model.”
For its part, Paramount Skydance has agreed to cover the $2.8 billion breakup fee to get Warner Bros. Discovery out of its deal with Netflix. The overall deal proposed by the company is valued at a around $111 billion, with WBD shares being valued at around $31 each in cash. The deal involves the entirety of the company, while Netflix had no plans to buy its linear cable networks.
