Netflix (NFLX.US) withdraws from the bidding war! Paramount Sky (PSKY.US) makes a billion-dollar offensive, but Warner Brothers Discovery (WBD.US) is expected to emerge as the winner.

After Paramount Skydance (PSKY.US) raised its bid to acquire Warner Bros. Discovery (WBD.US), Netflix (NFLX.US) announced that it would abandon its acquisition of Warner Bros. Discovery's film and television studios, as well as HBO Max streaming service, thereby exiting the bidding war. Netflix stated on Thursday, "The deal we previously negotiated could have created value for shareholders and had a clear path to regulatory approval. However, to match Paramount Skydance's latest offer, the deal would no longer be financially attractive, so we declined to counter the offer." Following this news, Netflix's stock surged over 9% after hours on Thursday, indicating that investors were pleased with the company's decision to walk away from the deal; Paramount Skydance's stock rose over 6%. Earlier this week, Paramount Skydance increased its bid to acquire all shares of Warner Bros. Discovery from $30 per share to $31 per share in an all-cash transaction, higher than Netflix's offer of $27.75 per share. Unlike Netflix, Paramount Skydance's acquisition proposal covered all of Warner Bros. Discovery's businesses, including the premium TV networks CNN, TBS, and TNT. Additionally, Paramount Skydance's latest offer included a clause - if the proposed merger failed to obtain regulatory approval, the company would pay a breakup fee of $7 billion. Paramount Skydance also agreed to assume a $2.8 billion breakup fee that Warner Bros. Discovery would have to pay if the deal with Netflix did not go through. In a statement on Thursday, the Warner Bros. Discovery board of directors stated that Paramount Skydance's total bid of $111 billion in cash was more favorable to shareholders than the agreement previously reached with Netflix. Given the superior bid from Paramount Skydance, Netflix had originally four days to revise its own proposal. However, the streaming giant ultimately chose to walk away, putting an end to the months-long bidding war of back-and-forth revisions between the two parties. David Zaslav, CEO of Warner Bros. Discovery, stated in the announcement, "Netflix is a great company, and throughout the process, Ted, Greg, Spencer, and their teams have been excellent partners." He was referring to Netflix's co-CEOs Ted Sarandos, Greg Peters, and CFO Spencer Neumann. He added, "Once the board votes to approve the merger with Paramount Skydance, it will create tremendous value for our shareholders. We are excited about the potential of the combined Paramount Skydance and Warner Bros. Discovery, and look forward to starting telling world-class stories together." Last week, Netflix offered Warner Bros. Discovery a seven-day waiver period, allowing them to re-engage in negotiations with Paramount Skydance, leading to the higher bid. Sarandos stated last week in an interview that the reason Netflix granted Warner Bros. Discovery the waiver to re-engage with Paramount Skydance was to provide shareholders with clearer information. He said, "Paramount Skydance has been creating a lot of noise, causing confusion among shareholders...including making various hypothetical bids, communicating directly with shareholders, bypassing the Warner Bros. Discovery board. So, we gave the opportunity for shareholders to get what they deserve - complete clarity and certainty." However, at the time, Sarandos did not specify whether Netflix would increase its own bid to match Paramount Skydance's revised offer. In their statement, Netflix's other co-CEOs said, "Warner Bros. Discovery is a world-class organization, and we thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer, and the Warner Bros. Discovery board for conducting a fair and rigorous process." They added, "We believe we could have been excellent stewards of the iconic Warner Bros. Discovery brands, and our deal would have strengthened the entertainment industry and preserved and created more production jobs in the U.S. However, this deal was always a 'nice-to-have' at the right price rather than a 'must-have at all costs' transaction."