Paramount Skydance emerged as the winner in a months-long battle to acquire Warner Bros Discovery, after streaming giant Netflix on Thursday refused to raise its bid for the storied Hollywood studio.

“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 to Reuters that it was walking away from bidding for Warner Bros Discovery. The Warner Bros board still has to terminate the Netflix deal and 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.”

Paramount maintained its dogged pursuit of Warner Bros, launching a hostile campaign to wrest the prize from Netflix.

It managed to lure Warner Bros back to the bargaining table last week, with the potential of an increased cash offer for the company.

Earlier in the day, Warner Bros said Paramount’s revised $31-a-share offer was superior to Netflix’s bid of $27.75 per share for Warner Bros’ streaming and studio assets.

A Netflix adviser, speaking on condition of anonymity, said they had recommended the streaming service should bow out of the bidding because the deal no longer made economic sense.

Netflix co-CEO Ted Sarandos hinted that the streaming giant would not substantially raise its offer in a February 20 interview with Fox News’ Liz Claman, where he emphasised that Netflix has been “very disciplined buyers.”

The adviser said Netflix was bidding against a billionaire who signalled a willingness to pay a price for Warner Bros that Netflix viewed as irrational.

“There’s no point in playing chicken with someone who won’t turn the wheel,” said the source, referring to billionaire Larry Ellison, co-founder, executive chairman and chief technology officer of Oracle and father of Paramount CEO David Ellison.

Netflix shares jumped more than 10% after it declined to raise its offer.

REGULATORY CONCERNS

Paramount’s merger with Warner Bros would unite two major Hollywood studios, two streaming platforms (HBO Max and Paramount+) and two news operations (CNN and CBS).

The Ellisons have ties to President Donald Trump. Still, the bid is likely to face antitrust scrutiny in Washington, foreign countries and US states, including California.

“Approval from federal regulators seems likely given the political environment; however, we think it is very likely that some state regulators - most notably, California Attorney General Rob Bonta - could attempt to challenge the deal.

We think there is potential for European regulators to have a say as well,“ TD Cowen analysts said in a note.

Bonta, a Democrat, said late on Thursday that this is not a done deal.

“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 added.

States have the power to sue to block deals, though the DOJ has the most resources to do so.

Democratic Senators Elizabeth Warren, Bernie Sanders and Richard Blumenthal have expressed concern that the deal’s approval could be tainted by political favouritism.

In its revised bid, Paramount raised the termination fee it would pay should the deal fail to gain regulatory approval to $7 billion from $5.8 billion.

It also agreed to cover the $2.8 billion fee Warner Bros would owe Netflix for walking away from the merger agreement.

The Ellison Trust is committing $45.7 billion in equity, up from $43.6 billion previously, and is backed by Larry Ellison, who also agreed to provide additional funds to satisfy Paramount’s bank solvency requirements, the firm said.

Bank of America Merrill Lynch, Citi and Apollo are providing $57.5 billion in debt financing, increased from an earlier $54 billion commitment.

Activist investor Ancora Holdings, which owns a small stake in Warner Bros and had stepped up pressure on the HBO owner to engage more with Paramount, welcomed the latest offer.

“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.”