Netflix Drops Warner Bros. Bid, Leaving Paramount the Winner

(Bloomberg) -- Netflix Inc. dropped out of the fight to buy Warner Bros. Discovery Inc., clearing the way for rival bidder Paramount Skydance Corp. to clinch its $111 billion deal for the historic Hollywood studio.

The streaming industry leader said that while it believed its deal would have passed muster with regulators and created shareholder value, it didn’t want to keep bidding.

“We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive,” Netflix said Thursday in a statement. Instead, it will keep investing in its business, including about $20 billion this year on films, TV shows and other entertainment offerings.

Netflix shares jumped more than 13% in after-hours trading, indicating that investors were happy to see the company walk away from the deal. Warner Bros. fell, with investors no longer anticipating a bidding war. Paramount shares were little changed.

Netflix inked an $82.7 billion deal, including assumed debt, to acquire the studio and streaming businesses of Warner Bros. in December, but repeated counteroffers from Paramount for the entire company kept the auction open. Late Thursday, Warner Bros. deemed Paramount’s latest $31-a-share bid the superior offer.

“I am extremely proud of the rigorous process this board has run over the past five and a half months that has led us to the cusp of combining these two storied companies and the excitement it will bring to audiences for many years to come,” Warner Bros. Chair Samuel A. Di Piazza Jr. said in statement.

Netflix’s decision not to raise its offer “has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals,” Ancora Holdings Group, an activist investor in Warner Bros., said in a statement. “This is a win-win for shareholders and the industry.”

The takeover fight has been contentious, in Hollywood and in Washington. Both Netflix co-Chief Executive Officer Ted Sarandos and Paramount CEO David Ellison made pilgrimages to the US capital this week to meet with lawmakers.

Sarandos spent about an hour on Thursday with officials in the Trump administration.

According to reporting by InvestmentNews:

For investors, the board’s determination and Netflix’s decision not to counter marks a pivotal moment in the evolving consolidation landscape across the media and entertainment sector.

Under the terms of Paramount's proposed merger agreement:

• Paramount will acquire WBD for $31.00 per WBD share in cash for 100% of the company;
• A daily "ticking fee" of $0.25 per quarter will accrue after September 30, 2026, until the consummation of the Paramount transaction;
• A regulatory termination fee of $7 billion would be payable in the event the transaction does not close due to regulatory matters;
• Paramount will pay the $2.8 billion termination fee which WBD is required to pay to Netflix to terminate its existing Netflix merger agreement;
• Paramount will eliminate WBD's potential $1.5 billion financing cost associated with its debt exchange offer;
• The "Company Material Adverse Effect" definition excludes the performance of WBD's Global Linear Networks business;
• The Ellison Trust is providing a $45.7 billion equity commitment, and Larry Ellison is guaranteeing such commitment, including an obligation to contribute additional equity funding to Paramount to the extent needed to support the solvency certificate required by Paramount's lending banks, and
• Bank of America Merrill Lynch, Citi and Apollo are providing a $57.5 billion debt commitment.

Source：InvestmentNews,  yahoo!finance