Paramount (PSKY) Shares Surge as Netflix Abandons Warner Bros Discovery Pursuit

TLDR

• Warner Bros Discovery’s board has labeled Paramount Skydance’s $111bn proposal as “superior” compared to Netflix’s competing offer
• Netflix has withdrawn from the bidding, stating the $31 per share valuation makes the acquisition “no longer financially attractive”
• The Paramount proposal encompasses WBD’s complete portfolio, including HBO, CNN, and iconic franchises like Harry Potter and Batman
• Significant regulatory scrutiny lies ahead, with California’s Attorney General and federal/European authorities still reviewing the transaction
• Employees at both CBS News and WBD have expressed serious concerns regarding potential layoffs and editorial direction under Ellison leadership

Paramount Skydance has overcome a significant obstacle in its pursuit of Warner Bros Discovery following Netflix’s decision to exit the competition, propelling Paramount shares 6% higher in extended trading.

On Thursday, Netflix announced it would decline to counter Paramount’s $31-per-share proposal after WBD’s board designated it as the “superior” bid. Netflix’s co-CEOs Ted Sarandos and Greg Peters explained that the elevated price point rendered the transaction “no longer financially attractive.”

This decision concludes several months of competitive bidding that commenced when Paramount initially contacted WBD in September.

Paramount Skydance Corporation Class B Common Stock, PSKY

The $111bn Paramount proposal encompasses WBD’s entire operations — including HBO, CNN, and valuable intellectual property like Harry Potter and Batman franchises. By contrast, Netflix’s initial $83bn December agreement covered exclusively WBD’s studio operations and streaming platforms.

The Ellison family, which merged Skydance with Paramount in the previous year, stands to acquire oversight of CBS News, 60 Minutes, and CNN through this proposed consolidation.

Netflix shares surged 8.5% in after-market trading, with investors seemingly pleased the streaming giant avoided a transaction carrying substantial antitrust exposure.

Regulatory Road Ahead

The transaction remains far from finalized. Approval from the US Department of Justice and European regulatory bodies is still required.

Paramount enhanced its proposal by increasing the per-share price by $1 from its December offer, introduced a $0.25-per-share quarterly payment should the deal extend beyond September, and included a $7bn breakup fee if regulatory authorities reject it.

Additionally, Paramount committed to assuming the $2.8bn termination payment WBD would owe Netflix upon exiting their original agreement.

Staff Concerns

Personnel at CBS News and WBD have responded to the announcement with considerable apprehension. Workers anticipate that combining two major news operations will result in workforce reductions as duplicate positions are consolidated.

Several staff members have voiced unease about Bari Weiss, who was named CBS News editor-in-chief last October, potentially assuming expanded responsibilities. Weiss lacks previous television news background, and her leadership has received mixed reviews.

Seth Stern from the Freedom of the Press Foundation issued sharp criticism, cautioning that Ellison would favor corporate priorities above journalistic independence.

Political considerations have also emerged as factors. Trump, who maintains ties to Larry Ellison, has commented publicly on the bidding process on multiple occasions. David Ellison was present at Trump’s State of the Union address Tuesday as Senator Lindsey Graham’s guest.

WBD has scheduled an employee town hall meeting for Friday morning. In a Thursday memorandum, CNN leader Mark Thompson encouraged staff to avoid premature conclusions.

Paramount shares gained 6% in after-hours trading when the news broke.

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