Netflix Inc (NASDAQ:NFLX) said Thursday it will not increase its offer for Warner Bros Discovery Inc (NASDAQ:WBD) after Warner Bros concluded that a revised proposal from Paramount Skydance Corp (NASDAQ:PSKY) represents a superior offer under the terms of its existing merger agreement with the streaming group.
Netflix shares climbed nearly 7% in premarket trading on Friday, while Paramount surged about 10% and Warner Bros declined roughly 2%.
In a joint statement, Netflix co-CEOs Ted Sarandos and Greg Peters said the agreement they had negotiated offered clear shareholder value and a defined regulatory pathway, but matching Paramount Skydance’s higher proposal would no longer make financial sense.
“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,” Sarandos and Peters said.
Warner Bros. Discovery’s board reached its conclusion after consulting independent financial and legal advisers. Earlier this week, the company disclosed that Paramount Skydance’s offer values WBD at $31.00 per share in cash, alongside a daily ticking fee equivalent to $0.25 per share per quarter beginning after September 30, 2026.
The proposal also includes a $7 billion regulatory termination fee payable by PSKY if the transaction fails due to regulatory issues. Paramount Skydance would additionally cover the $2.8 billion termination fee owed by WBD to Netflix under the existing merger agreement.
Larry J. Ellison and an affiliated trust are committed to providing additional equity financing if required to support the solvency certification demanded by PSKY’s lenders. The bid also defines a company material adverse effect clause that excludes performance from WBD’s Global Linear Networks division.
Following the announcement, brokerage Raymond James downgraded Warner Bros to Underperform.
“Netflix declined to raise its offer, thus effectively ending the bidding war for WBD,” analysts led by Ric Prentiss said in a note. “Since we do not anticipate any more topping bids, WBD now becomes a more traditional “arb spread” stock, and we see more attractive potential returns elsewhere in our coverage universe.”
Separately, analysts at Wolfe Research led by Peter Supino said that “if Netflix raised its bid, it risked being perceived as desperate, and it could have taken years to wash that perception away.”
“WBD was more a nice to have than need to have for Netflix, and Netflix declining to raise its bid only a few hours into its 4 business day review period is a signal of Netflix’s confidence in its stand-alone prospects,” he continued.
Netflix also thanked Warner Bros. Discovery CEO David Zaslav, CFO Gunnar Wiedenfels, Bruce Campbell, Brad Singer and the WBD board for conducting what it described as a fair and thorough process. The company said it believed it would have been a strong steward of Warner Bros.’ brands and that the transaction could have strengthened the entertainment industry while supporting production jobs in the United States.
The streaming company reiterated that the deal was always a nice to have at the right price rather than a must have at any price. Netflix added that its core business remains healthy, resilient and growing organically, supported by its content slate and streaming platform. The company plans to invest about $20 billion in films and series this year, expand its offering, and restart its share buyback programme.