Lawmakers and theatre owners warn merger could cut choices, raise prices, and cost jobs
Netflix just walked away from Warner Bros Discovery at the precise moment Paramount Skydance agreed to pay more and take on more risk — locking in one of Hollywood’s biggest ever media mergers and a clear valuation signal for investors.
Paramount Skydance has signed a US$110bn deal to acquire Warner Bros Discovery after a months-long bidding war, according to Reuters and an internal global townhall audio reviewed by Reuters.
The agreement follows a decision by the Warner Bros Discovery board that Paramount’s revised all-cash offer of US$31 per share for the entire company was “superior” to Netflix’s US$27.75‑per‑share agreement for Warner Bros Discovery’s studio and streaming assets.
According to Reuters, Paramount’s winning bid values Warner Bros Discovery at about US$110bn and includes roughly US$29bn of debt, making it one of Hollywood’s biggest media shake-ups.
Paramount’s offer covers Warner Bros Discovery’s pay‑TV networks such as CNN, TBS and TNT, as per CNBC, and would combine two major studios, two streaming platforms (HBO Max and Paramount+) and two news operations, Reuters said.
The deal gives Paramount access to Warner franchises including “Fantastic Beasts” and “The Matrix.”
Paramount leaned on aggressive terms and heavy financing to secure the outcome.
Reuters reported that the Ellison Trust is committing US$45.7bn in equity, up from US$43.6bn, backed by billionaire Larry Ellison, who also agreed to provide additional funds to meet Paramount’s bank solvency requirements.
Bank of America Merrill Lynch, Citi and Apollo are providing US$57.5bn in debt financing, increased from a previous US$54bn commitment.
To address deal risk, Paramount raised the termination fee payable if regulators block the transaction to US$7bn from US$5.8bn and agreed to cover the US$2.8bn break‑up fee Warner Bros Discovery would owe Netflix for walking away from their earlier merger agreement.
Reuters later reported, citing a regulatory filing, that Paramount has paid the US$2.8bn fee.
Markets reacted sharply.
Paramount shares jumped 24 percent after the signed agreement, while Netflix gained 13 percent as investors welcomed its decision to exit the bidding.
CNBC reported that Warner Bros Discovery shares fell about 2 percent after the latest developments.
Activist investor Ancora Holdings, which owns a small stake in Warner Bros Discovery, said Netflix’s decision not to raise its US$27.75 offer “has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals.”
It called the outcome “a win‑win for shareholders and the industry,” according to Reuters.
Netflix framed its withdrawal squarely around price discipline.
In a statement carried by Reuters, the company said it has “always been disciplined” and that matching Paramount Skydance’s latest offer would make the deal “no longer financially attractive.”
The company said it will not match the Paramount Skydance bid.
Netflix co‑CEOs Ted Sarandos and Greg Peters said the transaction they negotiated would have delivered shareholder value and offered a clear route to regulatory approval.
They told CNBC the Warner Bros Discovery deal was “a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
A Netflix adviser told Reuters they had recommended that the company bow out because the transaction “no longer made economic sense.”
The adviser said “there’s no point in playing chicken with someone who won’t turn the wheel,” referring to Larry Ellison.
Sarandos had already hinted at this stance in a February 20 interview with Fox Business’ Liz Claman, where he stressed that Netflix has been “very disciplined buyers.”
In his first interview after abandoning the pursuit, Sarandos told Bloomberg that Netflix had a “very tight range” of what it was willing to pay and knew “right away” what it would do when it received notice that Paramount Skydance had submitted a superior offer and the details of that deal.
He said rival Paramount Skydance is borrowing “tens of billions of dollars” to acquire a larger company, with CEO David Ellison planning cost cuts “in excess of US$16bn” that would mean “less production, less people working.”
Sarandos described Paramount’s approach as “unusual, irrational, whatever words you want to use in that.”
Regulation remains the key overhang.
Analysts at TD Cowen wrote that federal approval “seems likely given the political environment,” Reuters reported.
They warned that state regulators, “most notably, California Attorney General Rob Bonta,” may still challenge the deal and that European regulators could also be involved.
California’s Bonta said “this is not a done deal,” adding that the California Department of Justice has an open investigation and intends to be “vigorous” in its review.
On the other side of the Atlantic, Paramount is expected to “easily” win European Union antitrust approval, with any required divestments likely to be minor, Reuters reported, citing sources.
Lawmakers from both parties warn that a Warner Bros Discovery takeover could leave consumers with fewer choices and higher prices.
Cinema operators fear the merger of big Hollywood studios could cut jobs and reduce theatrical releases.
Bloomberg reported that Sarandos said Netflix was working with about 50 regulators worldwide on its own now‑abandoned deal and that he remained “very confident” the company had a clear regulatory path.
He also told Bloomberg that the US Department of Justice’s broad review of Netflix’s business practices is “done” and said, “We’re in the clear.”
Looking ahead, Sarandos told Bloomberg it is “unlikely” that Netflix will pursue another studio acquisition in the next 6–12 months, describing the company as “builders, not buyers,” and said Netflix will “just keep investing in the business” with the US$2.8bn break‑up fee.
He also downplayed the competitive threat from a combined HBO Max and Paramount+, saying “one and a half and one and a half still equals three” when referring to streaming share data.
