Netflix Inc: debt commitments related to deal terminated

Netflix Inc: debt commitments related to deal terminated

Netflix Inc. Exits WBD Deal, Avoids Debt Commitments Amid $2.8 Billion Termination Fee

Netflix Inc. (NFLX.O) has terminated its $27.75-per-share agreement to acquire Warner Bros. Discovery (WBD.O), exiting a months-long bidding war with Paramount Skydance Corp. (PSKY.O) without incurring debt obligations. The streaming giant confirmed it would not match Paramount's revised $31-per-share offer, which values WBD at approximately $111 billion, including debt. By walking away, Netflix avoids potential debt commitments tied to the deal while securing a $2.8 billion termination fee from Paramount.

The termination aligns with Netflix's stated focus on disciplined capital allocation. Co-CEOs Ted Sarandos and Greg Peters emphasized that the revised terms made the transaction "no longer financially attractive," reiterating confidence in organic growth and a $20 billion content investment plan for 2026. The decision has bolstered investor confidence, with Netflix shares surging over 10% in after-hours trading.

In contrast, Paramount's winning bid relies heavily on external financing. The consortium, led by Oracle co-founder Larry Ellison, has committed $45.7 billion in equity and secured $57.5 billion in debt from Bank of America, Citigroup, and Apollo Global Management. The deal also includes a $7 billion regulatory termination fee if antitrust approvals fail and a "ticking fee" of $0.25 per share for each quarter beyond September 30, 2026, that the transaction remains uncompleted. According to financial reports, these provisions amplify Paramount's financial exposure, particularly as WBD carries $33.5 billion in existing debt.

Analysts note that Netflix's exit simplifies its balance sheet while Paramount faces integration challenges and regulatory scrutiny. HSBC analysts highlighted that Netflix can now refocus on core operations, whereas Paramount's debt-laden strategy risks job cuts and operational restructuring. The outcome underscores divergent approaches to M&A, with Netflix prioritizing fiscal prudence over high-stakes acquisitions.

Warner Bros. Discovery's board must still formally adopt the Paramount deal, pending shareholder and regulatory approvals. Political concerns over media consolidation and pricing power have already drawn scrutiny from lawmakers, including Democratic Senator Elizabeth Warren, who labeled the merger an "antitrust disaster".

For Netflix, the termination fee provides immediate liquidity without diluting financial flexibility, reinforcing its reputation for strategic restraint in capital-intensive deals.