Netflix shares surged over nine percent in premarket trading on Friday as investors reacted positively to the company’s decision to withdraw from the bidding war for Warner Bros. Discovery. Meanwhile, Paramount saw a 10 percent increase in its stock value after winning the competition for some of the most sought-after TV and film assets globally.
In a move signaling its retreat, Netflix announced that it would not match Paramount Skydance’s revised offer of $31 per share for the coveted Hollywood studio. The streaming giant cited financial considerations as the primary reason for declining to match the bid.
Warner Bros. Discovery acknowledged Paramount’s superior offer of $31 per share, prompting Netflix to step back from its initial bid. Earlier, Netflix had granted Warner Bros. a seven-day waiver to seek a better offer from Paramount.
Paramount, in its updated bid, raised the termination fee to $7 billion US if the deal fails to secure regulatory approval, up from the previous $5.8 billion US. The company welcomed the Warner Bros. board’s unanimous reaffirmation of its bid as the stronger option.
The Ellison Trust, backed by Larry Ellison, increased its equity commitment to $45.7 billion US, with additional funds available to meet Paramount’s bank solvency requirements. Bank of America Merrill Lynch, Citi, and Apollo also raised their debt financing commitment to $57.5 billion US.
Antitrust scrutiny is expected for the merger, as Paramount CEO David Ellison’s ties to President Donald Trump may influence regulatory decisions. California’s Attorney General Rob Bonta expressed intent to conduct a thorough review of the deal.
Some Democratic senators raised concerns about potential political influence on the approval process, questioning the integrity of the merger. Paramount’s consolidation with Warner Bros. would bring together two major studios, streaming platforms, and news operations, creating a significant presence in the entertainment industry.
Netflix’s decision to step back from the bidding process came following CEO Ted Sarandos’ visit to the White House, where he did not meet with Trump. The president’s dissatisfaction with political remarks made by a Netflix board member added a layer of controversy to the situation.
Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal raised suspicions of political favoritism potentially impacting the merger approval process, highlighting concerns about undue influence in the deal.
The merger between Paramount and Warner Bros. represents a significant development in the entertainment industry, with regulatory scrutiny and political implications adding complexity to the transaction.