Key Points
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Netflix failed to secure a deal to buy Warner Bros. studio assets, getting outbid by Paramount Skydance.
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Paramount Skydance’s credit rating was downgraded to junk status due to concerns over high debt levels related to the acquisition.
Netflix (NASDAQ: NFLX) was outbid by Paramount Skydance, which announced on February 27 that it will acquire Warner Bros. Discovery for $31 per share in cash, valuing the deal at $110 billion in enterprise value. Netflix initially offered $27.75 per share with a total enterprise value of $82.7 billion to expand its production capacity, but investor skepticism about the deal led to a share price drop of approximately 24% between the announcement on December 5 and February 23.
After Paramount’s successful bid, it will take on $54 billion in debt, prompting Fitch Ratings to downgrade its credit rating to BB-plus, below investment grade. In contrast, Netflix’s stock has risen by about 30% since February 23, as investors seem relieved to avoid potential risks associated with the Warner Bros. acquisition.
