Netflix's $83B Bid Walks Away: The Numbers Behind the Exit

Netflix agreed in December to buy Warner Bros. Discovery for $82.7 billion, or $27.75 per share. The company walked away from the deal last week, declining to raise its offer to match a rival bid from Paramount Skydance. Netflix's co-CEOs stated the required price was no longer financially attractive, citing the need for financial discipline.

The market reaction was swift and clear. Netflix's stock jumped as much as 13% in after-hours trading, signaling strong investor relief. This pop suggests the market viewed the $82.7 billion deal as a risky, expensive distraction from Netflix's core business. The company's statement framed the exit as a principled stand, noting its deal had a clear path to regulatory approval but was not worth the escalating price.

By walking away, Netflix avoided a bidding war that would have pushed the purchase price far beyond its initial $82.7 billion agreement. The move clears the path for Paramount to close its $111 billion deal for the entire company. For Netflix, the bottom line is a decision to keep capital for its own growth, including about $20 billion this year on content.

Paramount's Winning Bid: The Superior Proposal

Paramount's victory came down to a superior financial package. The company's final offer valued all of Warner Bros. Discovery at $31 per share. This was an all-cash proposal, providing immediate liquidity to WBD shareholders and a straightforward path to closing.

The key sweetener was a $7 billion 'regulatory termination fee' attached to the deal. This fee, paid by Paramount to Warner Bros. Discovery if the merger fails to gain regulatory approval, significantly de-risks the transaction for WBD's board and shareholders. It ensures WBD receives substantial compensation regardless of the lengthy antitrust review process, which is a major advantage over Netflix's original proposal.

Paramount also secured the necessary financing to back its $111 billion bid. The company has committed debt financing for the deal, with a reported $57.5 billion in funding already in place. This pre-arranged capital gives Paramount a decisive execution edge, allowing it to move forward without the uncertainty of raising fresh capital mid-deal.

The Path Forward: Catalysts and Regulatory Risks

The Paramount-WBD merger now faces a lengthy regulatory gauntlet. The deal still requires several months of review from antitrust authorities, with the US Senate Judiciary Committee scheduled to hold a hearing on March 4. This process will scrutinize the combined entity's market power, especially given its control over CNN, HBO, and a major film studio.

Paramount carries a significant financial risk if the deal fails. The company agreed to a $7 billion 'regulatory termination fee' that it must pay to Warner Bros. Discovery if the merger does not close. This fee de-risks the transaction for WBD's board but represents a substantial cost for Paramount if regulatory hurdles prove insurmountable.

For Netflix, the path forward is clear. The company will redirect its capital, planning to spend about $20 billion this year on films, TV shows and other entertainment offerings. This focus on its core streaming business, bolstered by the recent stock pop, provides a disciplined alternative to a sprawling media acquisition.