After being seemingly set to acquire Warner Bros. from Warner Bros. Discovery, Netflix has now walked away from the deal. Netflix’s exit now makes the likelihood of Paramount Skydance taking control of Warner Bros. Discovery all the more likely.
Key Takeaways
- Netflix has chosen not to match Paramount’s revised offer, ending its bid to acquire Warner Bros.
- Netflix’s exit clears the path for a Paramount acquisition, with Paramount’s offer for all of Warner Bros. Discovery including a commitment to cover the $2.8B termination fee owed to Netflix.
- Paramount will owe Warner Bros. Discovery $7 billion if its deal later collapses.
Up until now, it had seemed as though Warner Bros. Discovery was set on doing business with Netflix. The deal would have seen Netflix taking control of the Warner Bros. side of the business. Basically, the streaming side.
Although Paramount had repeatedly argued its offer was superior, Warner Bros. Discovery continually made the case to investors that Netflix’s offer was the better choice.
That, however, changed this week. Yesterday Warner Bros. Discovery issued a statement confirming that its Board of Directors had determined that a revised proposal from Paramount was now the “superior proposal.”
Soon after this, Netflix issued its own statement confirming it had no plans to match Paramount’s latest offer, effectively pulling out of negotiations to purchase Warner Bros. Discovery.
“We believe we would have been strong stewards of Warner Bros.’ iconic brands, and that our deal would have strengthened the entertainment industry and preserved and created more production jobs in the U.S. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price,” Netflix said.
According to Warner Bros. Discovery’s announcement, the Netflix merger agreement is currently still in effect, and still continues to be the recommendation from its Board.
However, this is now just a formality as the terms of the agreement allow Netflix a period of time to respond with a matching offer. With no such response expected to come from Netflix, Warner Bros. Discovery will soon have the option to terminate the Netflix merger agreement.
Once that happens, WBD would be required to pay a $2.8 billion termination fee to Netflix. A fee which is expected to be paid by Paramount under its offer.
With Netflix now seemingly out of the way, the path for Paramount to purchase Warner Bros. Discovery is much clearer. However, it is still subject to regulatory checks and approval.
If, for whatever reason, the Paramount merger doesn’t go through as now expected, Warner Bros. Discovery will be set to receive a $7 billion termination fee from Paramount, according to the details of the latest offer.
Unlike Netflix’s deal, Paramount’s offer is for all of Warner Bros. Discovery, including all of its pay-TV networks.
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