Los Gatos-based Netflix Inc. announced Thursday evening that it was walking away from efforts to acquire the legendary Hollywood studio Warner Bros. The publicly-traded streaming behemoth and movie producer is positioned to pocket a $2.8 billion termination fee—one of the largest breakup fees in corporate history—after the Southern California news and entertainment company negotiated with Paramount Skydance to sell the company at a higher price.
Paramount, which is controlled by Silicon Valley billionaire Larry Ellison and his son David, will pay $111 billion for the historic Hollywood studio. Warner Bros. Discovery Inc. owns streaming and film studios, along with cable channels including CNN, Food Network, HBO, HGTV, TBS, TNT and Turner Classic Movies.
“The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” Netflix co-CEOs Ted Sarandos and Greg Peters said in a Thursday statement.
“We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid.”
On Thursday, Sarandos met at the White House with chief of staff Susie Wiles and, earlier in the day, with Attorney General Pam Bondi and DOJ’s acting antitrust chief, Omeed Assefi, according to unnamed sources quoted by CBS, which is owned by Paramount.
The combined Paramount-Warner company will, in addition to CBS, include the CNN news service, whose management President Donald Trump called “either corrupt or incompetent” in December.
After the Ellison family took control of Paramount last year, it hired Bari Weiss as editor-in-chief of CBS News. Trump says about the Ellisons, “They’re friends of mine. They’re big supporters of mine.”
The huge leveraged buyout will leave Paramount-Warner with $90 billion in debt. The Ellison Trust is providing a $45.7 billion equity commitment, with Larry Ellison personally guaranteeing the amount.
The Oracle co-founder currently sits at no. 6 on the Forbes Real-Time Billionaires List with an estimated net worth of $194.9 billion, according to Forbes.
The Los Gatos company will have a stronger balance sheet without the acquisition. “Netflix’s business is healthy, strong and growing organically, powered by our slate and best-in-class streaming service,” the company CEO said the company’s co-CEOs said in this week’s statement.
“This year, we’ll invest approximately $20 billion in quality films and series and will expand our entertainmententertaininment offering. Consistent with our capital allocation policy, we’ll also resume our share repurchase program.”
Netflix began in Scotts Valley and moved to Los Gatos in 1999. In 2022, it put its former 160,000-square foot Los Gatos headquarters at 100 and 150 Winchester Circle, which it had leased since 2006, up for lease.
The Silicon Valley Business Journal reported in 2022 that about 20% of the company’s 11,300-employee workforce is Silicon Valley-based.
In 2010, 44% of the town’s sales tax revenues came from Netflix, up from 31% in 2008, according to municipal reports, but that has declined as Netflix pivoted from disk rentals to subscription-based streaming, which does not generate sales taxes.
