Netflix(NFLX.US) withdraws from bidding war! Under Paramount's billion-dollar push(PSKY.US), Warner Bros. explores(WBD.US), expected to be acquired.

After Paramount Tums (PSKY.US) increased its bid to acquire Warner Bros. Discovery (WBD.US), Netflix (NFLX.US) announced it would abandon its bid to acquire Warner Bros. Discovery’s film and TV studios and HBO Max streaming service, thus withdrawing from the bidding war. Netflix stated in a Thursday release, “The deal we negotiated earlier could have created shareholder value and had a clear path to regulatory approval. However, to match Paramount Tums’ latest bid, the deal would no longer be financially attractive, so we declined to follow up.”

Following this news, Netflix’s shares rose over 9% in after-hours trading on Thursday, indicating investor approval of the company’s decision to withdraw; Paramount Tums rose over 6%.

Earlier this week, Paramount Tums increased its all-cash bid to acquire all of Warner Bros. Discovery’s shares from $30 to $31 per share, exceeding Netflix’s offer of $27.75 per share. Unlike Netflix, Paramount Tums’ proposal covers all of Warner Bros. Discovery’s businesses, including CNN, TBS, and TNT. Additionally, Paramount Tums’ latest bid includes a clause — if the proposed merger fails to gain regulatory approval, the company will pay a $7 billion breakup fee. Paramount Tums also agreed to bear the $2.8 billion breakup fee that Warner Bros. Discovery would owe if the deal with Netflix does not go through.

Warner Bros. Discovery’s board of directors stated in a Thursday release that Paramount Tums’ new acquisition proposal, totaling $111 billion, is more favorable to shareholders than the earlier agreement with Netflix. Given Paramount Tums’ superior bid, Netflix had four days to revise its own proposal. However, the streaming giant ultimately chose to withdraw, bringing an end to the months-long bidding war with multiple revised offers.

Warner Bros. Discovery CEO David Zaslav said in a statement, “Netflix is a great company, and throughout this process, Ted, Greg, Spencer, and their teams have been outstanding partners.” He was referring to Netflix Co-CEOs Ted Sarandos, Greg Peters, and CFO Spencer Neumann. He added, “Once the board votes to approve the merger agreement with Paramount Tums, it will create tremendous value for our shareholders. We are excited about the potential of the combined Warner Bros. Discovery and Paramount Tums and look forward to telling compelling stories that resonate worldwide.”

Last week, Netflix granted Warner Bros. Discovery a seven-day waiver to re-engage with Paramount Tums in negotiations, which led to the higher bid. Sarandos said in an interview last week that the waiver was granted to give shareholders clearer information. He stated, “Paramount Tums has been making a lot of noise, causing confusion among shareholders… including proposing various hypothetical bids and communicating directly with shareholders, bypassing Warner Bros. Discovery’s board. So we provided an opportunity for shareholders to get what they deserve — complete clarity and certainty.” However, Sarandos did not specify whether Netflix would raise its own bid to match Paramount Tums’ revised offer.

The other two Netflix co-CEOs stated in a release, “Warner Bros. Discovery is a world-class organization, and we appreciate 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 managers of Warner Bros. Discovery’s iconic brands, and our deal would have strengthened the entertainment industry and preserved or created more production jobs in the U.S. But this deal was always an ‘icing on the cake’ at the right price, not a ‘must-do at all costs’ transaction.”