Paramount Skydance is on course to win the Warner Bros Discovery (WBD) takeover battle after rival Netflix stepped away.

The World’s largest streaming service had been in pole position to land a deal by which it would pay $27.75 per share for Warner’s studio and HBO Max streaming businesses, valuing the divisions at almost $83bn (£61.6bn) including debt.

Netflix had been invited to raise its bid after Paramount submitted a final offer, for the whole WBD business, of $31 per share earlier this week that ultimately concluded a ping-pong process of sweetened bids.

That final offer valued WBD at $111bn (£82.4bn) including debt.

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Warner’s board declared on Thursday night that while it continued to recommend the offer by Netflix, it now considered the proposal from Paramount as “superior” – its first hint of support for the bidder declared as hostile when the saga began back in December.

Netflix responded by pulling out of the process just hours later, declaring that a deal was “no longer financially attractive”.

Co-CEOs Ted Sarandos and Greg Peters said: “We believe we would have been strong stewards of Warner Bros’ iconic brands. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”

The decision to withdraw does not mean that Paramount has WBD in the bag just yet.

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The board is yet to give its blessing to the deal though WBD has changed its tone and voiced support for the bid for the first time.

CEO David Zaslav used a statement to declare that Paramount’s offer “will create tremendous value”, adding that WBD was “excited about the potential of a combined Paramount Skydance and Warner Bros Discovery”.

Warner shareholders and regulators will also have to agree to the takeover, with the process for the latter facing competition concerns along with questions over political influence.

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If Paramount Skydance is successful in its takeover attempt, it would own the news channel CNN as well as CBS News, sparking concern about concentrating news services within a small number of companies linked to Donald Trump’s allies.

Paramount’s chair and chief executive David Ellison is the son of billionaire Larry Ellison, an ally of the US president who has put up tens of billions of dollars to satisfy funding guarantees for the WBD bid.

A Paramount-Warner combination would encompass two of Hollywood’s five legacy studios.

Beyond Harry Potter, Warner movies like Superman and Barbie – as well as hit TV series like Succession – would join Paramount’s content library.

Paramount’s line-up of titles include Top Gun and The Godfather and includes the Paramount+ streaming service.

There were big movements for share prices in after-hours trading as the developments played out.

Netflix saw its stock climb by 8.5% in a relief rally while those for Paramount were also up sharply – by 6.2%.

WBD shares were trading almost 2% lower at $28.80 – well below the Paramount offer price of $31.