Paramount set to buy Warner Bros after Netflix walks away

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Paramount Skydance has triumphed in its months-long campaign to scupper Netflix’s deal to buy Warner Bros Discovery, after its $111 billion (€94 billion) bid for the Hollywood studio drove the streaming giant to walk away.

Netflix on Thursday said it would not match Paramount’s $31-a-share offer after the board of Warner Bros Discovery (WBD) declared it “superior” to the deal agreed with the streaming company. The price required to match Paramount’s offer meant “the deal is no longer financially attractive”, Netflix said.

The decision by Netflix clears the way for Paramount to wrest control of assets including HBO, CNN and film franchises such as Harry Potter and Batman in a takeover that will have sweeping ramifications for Hollywood and the wider media landscape.

Before its latest bid, WBD had rejected eight offers from Paramount, after the media group — run by David Ellison and backed by his father, Oracle billionaire Larry Ellison — first approached it in September.

Unlike Netflix, Paramount’s bid is for the entire WBD business, including CNN, HBO and other cable networks. If the deal is approved, the Ellisons will control some of the biggest names in the US news media: CBS News, 60 Minutes and CNN.

The Ellisons have thrust themselves to the top of US media after combining Skydance and Paramount last year. Shares in Paramount jumped by 6 per cent in after-market trading, pushing the media group’s market value above $12bn.

David Zaslav, WBD chief executive, said the merger with Paramount “will create tremendous value for our shareholders”. The deal will need to be approved by regulators in the US and Europe.

Rob Bonta, California’s attorney-general, vowed to conduct a “vigorous” review of the proposed deal.

“Paramount/Warner Bros is not a done deal,” he said. “These two Hollywood titans have not cleared regulatory scrutiny — the California department of justice has an open investigation, and we intend to be vigorous in our review.”

Shares in Netflix jumped 8.5 per cent in post-market trading, as investors welcomed the news of the streamer walking away from one of the biggest media deals in history — which would have come with huge antitrust risks. Netflix first struck a nearly $83 billion deal to buy WBD’s studio and streaming business in December.

Netflix co-chief executives Ted Sarandos and Greg Peters argued they would have been “strong stewards” of WBD’s brands but said “this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price”.

Netflix’s bid faced scrutiny from regulators and among some in Hollywood, who remain angry at the disruption the streaming pioneer unleashed on the industry. Sarandos had promised that Netflix would release more films in cinemas if it bought WBD, but many were sceptical.

After the WBD board backed the Netflix deal, Paramount launched an all-out pressure campaign to force WBD back to the negotiating table, appealing to the Trump administration and threatening to launch a proxy fight to overturn WBD’s board.

Paramount bumped up its latest offer by $1 a share to $31 compared with the offer WBD rejected in December, as well as offering guarantees over financing of the deal. Its improved approach also included a $0.25-a-share fee for every quarter the deal does not close after the end of September and a guarantee of a $7 billion break fee if it is not approved by regulators.

Paramount also offered to pay the $2.8 billion fee owed to Netflix if WBD terminates the original deal.

The merger talks have also been affected by politics, as Donald Trump — who counts Larry Ellison as a strong supporter — frequently weighed in on the deal. The US president also purchased about $2 million worth of Netflix and Warner Bros corporate bonds.

In December, Trump said Netflix would “have a very big market share” in streaming if it acquired Paramount, adding: “It could be a problem.”

Over the weekend, Trump called on Netflix to sack former Democratic national security official Susan Rice from its board or “pay the consequences” after she criticised corporate executives who “bent the knee” to the president. And on Tuesday, David Ellison attended Trump’s state of the union address as a guest of Republican senator Lindsey Graham.

Paramount argued to investors that it had a clearer path towards regulatory approval than Netflix — charges that Netflix continued to reject even as it pulled out of the deal.

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