NEW YORK CITY, New York: Paramount Skydance has prevailed in its bid to acquire Warner Bros Discovery, after Netflix declined to raise its offer for the Hollywood studio, ending a months-long takeover battle.

"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," Netflix said in a statement.

Netflix confirmed that it was walking away from the bidding. Warner Bros' board must still vote to terminate its agreement with Netflix and formally adopt Paramount Skydance's offer.

"Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders," Warner CEO David Zaslav said in a statement. "We are excited about the potential of a combined Paramount Skydance and Warner Bros Discovery and can't wait to get started working together telling the stories that move the world."

Earlier on February 26, Warner Bros said Paramount's revised US$31-per-share bid was superior to Netflix's $27.75-per-share offer for Warner's streaming and studio assets.

A Netflix adviser, speaking on condition of anonymity, said the streaming giant was advised to step away because the deal no longer made economic sense. Netflix co-CEO Ted Sarandos had hinted in a February 20 interview that the company would remain "very disciplined buyers."

The adviser said Netflix was effectively bidding against billionaire Larry Ellison, father of Paramount CEO David Ellison, who appeared willing to pay a price Netflix considered excessive.

"There's no point in playing chicken with someone who won't turn the wheel," the source said.

Netflix shares rose more than 10 percent after the company declined to raise its bid.

Regulatory Hurdles Ahead

A merger between Paramount and Warner Bros would combine two major film studios, two streaming platforms — HBO Max and Paramount+ — and two major news operations, CNN and CBS.

Despite the victory, the deal is expected to face regulatory scrutiny in the United States and abroad. TD Cowen analysts said federal approval appeared likely in the current political climate but cautioned that some state regulators, including California Attorney General Rob Bonta, could challenge the transaction. European regulators may also weigh in.

Bonta said the deal was far from complete.

"These two Hollywood titans have not cleared regulatory scrutiny, the California Department of Justice has an open investigation, and we intend to be vigorous in our review," he said.

Democratic Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal have expressed concern that political favoritism could influence approval.

In its revised offer, Paramount increased the termination fee it would pay if regulatory approval is not secured to $7 billion, up from $5.8 billion. It also agreed to cover the $2.8 billion fee Warner Bros would owe Netflix for terminating their agreement.

The Ellison Trust is contributing $45.7 billion in equity, up from $43.6 billion, with additional funds available to meet Paramount's bank solvency requirements. Bank of America Merrill Lynch, Citi, and Apollo are providing $57.5 billion in debt financing, an increase from $54 billion previously.

Activist investor Ancora Holdings, which had urged Warner to engage more with Paramount, welcomed the outcome.

"Netflix's decision to not raise its offer of $27.75, less likely net debt adjustments, has paved the way for shareholders to receive meaningfully more cash and a truly viable path to government approvals," Ancora said in a statement. "This is a win-win for shareholders and the industry."