In yet another surprise development, Netflix today is pulling out of its signed agreement to acquire Warner and HBO. Netflix walks away with billions, while Paramount loads up on massive debt.
The $83 billion deal with Netflix had already been signed, but Paramount continued bidding for Warner Bros Discovery.
Paramount's final $111 billion offer for all of Warner Bros Discovery has led Warner's board to recommend it to shareholders as the superior bid.
As a result, Netflix has formally withdrawn from the bidding war today by declining to match Paramount's higher offer:
- "The transaction we negotiated would have created shareholder value with a clear path to regulatory approval. However, 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 today.
Netflix pockets $2.8 billion
The signed agreement with Netflix will now be torn up. That will cost Warner $2.8 billion, which, under the new deal, will be paid by Paramount.
Netflix loses Warner Bros and HBO, which is acceptable on the grounds that Warner and HBO were "nice to have" but not "must have", it said. Netflix pockets the full breakup fee.
In 2025, Netflix reported a profit of just under $11 billion. The streamer has over 325 million subscribers and close to 1 billion viewers.
Paramount takes on enormous debt
With its new $111 billion bid, Paramount will acquire the Warner Bros film studio, HBO's TV studio operations, the HBO Max streaming service, and all TV channels under Warner Bros Discovery.
Paramount has a market capitalization of just $12 billion and posted a $3.13 billion loss last year. The acquisition will be the most highly leveraged ever. Paramount now faces a lengthy process to take over Warner and HBO, along with an astronomical financial hole. The deal must be approved by competition authorities in multiple countries.
In the end, Paramount will pay far more for Warner Bros Discovery than originally intended, while Netflix can watch one of its direct competitors take on massive debt to acquire another competitor that never truly threatened Netflix's dominance in the streaming market.
The industry expects Paramount's acquisition to lead to significant layoffs at Warner.
