Washington, United States. Netflix shares rose more than 10% on Friday after the company exited a bidding race for Warner Bros Discovery assets, declining to match a higher offer from Paramount.
Netflix withdraws from bidding
Netflix declined to match Paramount’s latest $31 per share bid or raise its offer of $27.75 a share for Warner Bros’s studio and streaming assets, saying the deal was “no longer financially attractive”.
Investor reaction and analyst comments
The decision was welcomed by investors. Netflix shares had shed more than 18% since the company announced its deal with Warner Bros on December 5.
Ben Barringer, head of technology research at Quilter Cheviot, called the move a “tick in the box” for discipline, adding that management teams should be able to value acquisitions and avoid overpaying.
Analysts and investors had questioned whether Netflix’s bid was a defensive attempt to block a future competitor or an offensive shift away from its historically disciplined build-versus-buy approach.
HSBC analysts said Netflix’s withdrawal would leave it free to refocus on its business while close competitors deal with regulatory approval, merger integration processes, and deal debts.
Paramount bid and valuation
Shares of the David Ellison-led Paramount were up 17%.
Paramount’s deal is valued at $110 billion, including debt, representing nearly 13 times Warner Bros’ EBITDA this year, according to LSEG estimates. That compares with Paramount’s valuation on the same basis of about 7 times its estimated earnings.
Strategic rationale for Paramount
A tie-up with Warner Bros would allow Paramount’s Hollywood studio to tap into Warner’s intellectual property, including franchises such as “Fantastic Beasts” and “The Matrix”, across film, television and streaming.
What do you think Netflix’s withdrawal signals about its approach to acquisitions?
