After months of high-stakes negotiations and boardroom manoeuvring, Paramount Skydance has emerged victorious in the battle to acquire Warner Bros Discovery, while Netflix has stepped back from the contest, a move that sent its shares surging more than 10 per cent.
The takeover saga has reshaped the Hollywood landscape, raising questions not only about valuations and strategic discipline, but also about regulatory scrutiny and the future structure of the global streaming industry.
Why Netflix Decided To Walk Away
Netflix confirmed it would not raise its bid for Warner Bros Discovery, signalling the end of its pursuit of the studio’s streaming and production assets, reported Reuters.
“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 said in a statement.
Citing a source advising Netflix, the streaming giant chose not to escalate the bidding war because the economics no longer made sense. The adviser indicated that Netflix was effectively bidding against a billionaire willing to pay what Netflix considered an irrational premium.
“There’s no point in playing chicken with someone who won’t turn the wheel,” the source said, referring to billionaire Larry Ellison, co-founder, executive chairman and chief technology officer of Oracle, and father of Paramount CEO David Ellison.
Netflix co-CEO Ted Sarandos earlier signalled restraint, emphasising in a February 20 interview that the company had been “very disciplined buyers”.
The market appeared to reward that discipline. Netflix shares jumped more than 10 per cent after the company declined to raise its offer.
Paramount’s Winning Bid: What Changed?
Paramount Skydance maintained pressure throughout the process, even launching a hostile campaign to draw Warner Bros back to negotiations. Its revised offer of $31 per share was deemed superior to Netflix’s $27.75 per share bid for Warner Bros’ streaming and studio assets.
Warner CEO David Zaslav expressed optimism about the merger, stating, “Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders. We are excited about the potential of a combined Paramount Skydance and Warner Bros Discovery and can’t wait to get started working together telling the stories that move the world.”
The Ellison Trust is committing $45.7 billion in equity, up from $43.6 billion previously. In addition, Bank of America Merrill Lynch, Citi and Apollo are providing $57.5 billion in debt financing, increased from an earlier $54 billion commitment.
Paramount also raised the termination fee payable if regulatory approval fails to $7 billion from $5.8 billion and agreed to cover the $2.8 billion fee Warner Bros would owe Netflix for exiting the prior agreement.
What The Combined Media Giant Would Look Like
If approved, the merger would unite two historic Hollywood studios, two major streaming platforms, HBO Max and Paramount+, and two significant news operations, CNN and CBS.
Such consolidation would create a formidable player in an industry already undergoing rapid transformation as streaming competition intensifies and traditional television revenues decline.
However, the scale of the deal is precisely what may attract regulatory scrutiny.
Regulatory Hurdles Ahead
The proposed merger is likely to face antitrust review in Washington, several US states including California, and potentially European jurisdictions.
TD Cowen analysts noted that while federal approval may be likely in the current political environment, state-level regulators could mount challenges. California Attorney General Rob Bonta said the transaction is far from settled, confirming that the California Department of Justice has an open investigation and intends to conduct a vigorous review.
Democratic Senators Elizabeth Warren, Bernie Sanders and Richard Blumenthal have also raised concerns that political considerations could influence approval.
States possess the authority to sue to block mergers, though the US Department of Justice typically holds greater enforcement resources.
What It Means For The Industry
For shareholders, activist investor Ancora Holdings described Netflix’s withdrawal as paving the way for a higher cash outcome and a more viable regulatory path.
For the industry, the deal underscores two contrasting strategies: Netflix’s disciplined capital allocation versus Paramount Skydance’s willingness to deploy significant equity and debt to secure scale.
Yet the outcome is not final. The Warner Bros board must formally terminate the Netflix agreement and adopt Paramount’s merger proposal, while regulators will determine whether the combined entity passes antitrust thresholds.
