Netflix bows out of Warner Bros. auction, Paramount to claim the prize

WASHINGTON — Netflix bowed out of the Warner Bros. Discovery sweepstakes Thursday, conceding the prize to Paramount Skydance.

The move came after Warner Bros. Discovery switched gears, announcing that Paramount Skydance’s revised bid had topped the one on the table from Netflix.

Warner’s reversal is the latest twist in Hollywood’s biggest auction in years — and five months after Paramount Chairman David Ellison began his dogged pursuit of the larger media company. Netflix was given four business days to regroup and potentially submit a higher offer; but late Thursday, Netflix announced that it had no intention to raise its bid.

“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,” Netflix Co-Chief Executives Ted Sarandos and Greg Peters said in a statement.

Warner Bros. Discovery said its board, in consultation with its bankers and lawyers, determined Paramount’s most recent offer constitutes a “superior proposal,” compared to the Netflix deal.

Paramount on late Monday offered to buy all of Warner Bros. Discovery for $31 a share in cash. Paramount had previously bid $30 a share. Paramount’s updated proposal contained several key sweeteners, including a commitment from tech billionaire Larry Ellison, through his Ellison Trust, to guarantee $45.7 billion in equity financing.

Larry Ellison, one of the world’s richest men, is personally backing his son’s bid to combine two historic studios to create a new Hollywood behemoth. Warner Bros. Discovery had demanded that Paramount line up more secure financing.

Netflix has offered $27.75 a share — but the streaming giant only wants Warner’s HBO, HBO Max and the Warner Bros. film and television studios in Burbank. Concerns have been growing that Netflix would face push-back from regulators as it seeks to swallow one of Hollywood’s historic film studios behind “Superman,” “Casablanca” and “The Matrix.”

Paramount’s offer includes acquiring HBO, the Burbank studios and Warner’s cable television channels like CNN and HGTV.

“We are pleased WBD’s Board has unanimously affirmed the superior value of our offer, which delivers to WBD shareholders superior value, certainty and speed to closing,” said David Ellison, Paramount’s chairman and chief executive.

Paramount also agreed to pay a $2.8 billion break-up fee that Warner would owe Netflix if Warner backs out of the deal signed on Dec. 4. Among its other concessions, the company agreed to increase the $31 a share offer should the regulatory review stretch beyond October. It also agreed to pay $7 billion should the deal fail to garner the blessing of regulators.

Bank of America Merrill Lynch, Citi and Apollo have agreed to provide $57.5 billion in debt financing.

Netflix did not immediately comment.

“We continue to believe [Paramount] will ultimately win the auction,” TD Cowen media analyst Doug Creutz said in a Thursday note to investors.

The new wrinkle comes as the auction has taken on increasingly political dimensions. Netflix Co-CEO Ted Sarandos made a trek to the White House on Thursday at a pivotal moment for the streaming giant, which itself has been navigating the high-stakes bidding war to acquire Warner Bros. Discovery.

Sarandos met with White House staff members and Justice Department officials, according to two people familiar with the meeting. The visit was arranged more than two weeks ago and President Trump was not scheduled to attend.

The White House and Netflix declined to comment on the substance of the meeting, but it emerges as the media giant has come under pressure by the president to fire board member Susan Rice, a former Biden administration adviser that Trump recently called a “political hack.”

Trump warned that if Netflix did not fire Rice, the company would “pay the consequences.”

The president’s demands to fire Rice marked a shift in the president’s involvement with Netflix’s business as it seeks to acquire Warner Bros.

Paramount executives have leaned into a multi-pronged strategy to scuttle the Netflix deal since December.

The Department of Justice has since opened an investigation to determine whether to try to block Netflix’s proposed $82.7-billion deal to take over Warner. Netflix has more than 300 million subscribers worldwide, and the addition of Warner’s HBO Max would make the streaming giant even more dominant.

Sarandos’ trek to the White House comes as the auction has increasingly taken on political dimensions.

Paramount — which is controlled by Larry Ellison, a Trump friend, and his family have been gaining momentum as they angle to thwart Netflix.

During a Senate hearing this month, some Republican lawmakers blasted Sarandos, raising questions about potential antitrust concerns and some of Netflix’s programming. Paramount Chief Executive David Ellison declined an invitation to participate in the Feb. 3 hearing.

This week, he was at the Capitol as a guest of Sen. Lindsey Graham (R-SC) for Trump’s State of the Union address. The two men were pictured giving a thumbs-up in a photo circulating on social media.

Trump has said he would stay out of the Netflix-versus-Paramount battle, but over the weekend he demanded, in a social media post, that Netflix “IMMEDIATELY” fire Rice from its board.

It was not known if the topic of Rice came up Thursday.

Sarandos has sought to downplay the controversy, saying during a BBC interview: “This is a business deal, it’s not a political deal.”
Paramount has enlisted a former Trump administration official, the lawyer Makan Delrahim, who served as Trump’s antitrust chief during the president’s first term.

In a confident move, Delrahim filed to win the Justice Department’s blessing in December — even though it didn’t have an agreement with Warner Bros. Discovery’s board, a requirement for the deal to advance. Earlier this month, a deadline for the Justice Department to raise issues with Paramount’s proposed Warner’s takeover passed without comment from the Trump regulators.