"Netflix had the legal right to match the PSKY offer. As you all know, they ultimately decided not to do that. That then resulted in a signed agreement with PSKY as of this morning. So that's where everything stands," Bruce Campbell, Warner Bros' chief revenue and strategy officer, said.
Paramount and Warner Bros did not immediately respond to requests for comment.
The agreement caps a bidding war after Netflix declined to match Paramount's latest $US31-per-share offer, which was deemed superior by Warner Bros to the streaming pioneer's $US27.75-per-share agreement for its studio and streaming assets.
Paramount shares jumped 24 per cent, while Netflix rose 13 per cent as investors welcomed its decision to back out of the Warner Bros race.
Paramount is expected to easily win European Union antitrust approval, with any required divestments likely to be minor, Reuters reported, citing sources.
However, the merger has drawn scrutiny from California State Attorney General Rob Bonta, who said the state is investigating the Paramount deal and will be "vigorous" in its review.
The deal - which includes some $US29 billion in debt - is among Hollywood's biggest media shake-ups and will create one of the largest film studios in the world, allowing Paramount to tap Warner's trove of intellectual property, including franchises such as Fantastic Beasts and The Matrix.
It will also allow Paramount to bolster its streaming efforts, with a potential combination of HBO Max and Paramount+, enabling it to gain market share and tussle with market leader Netflix.
Paramount was in pursuit of Warner Bros since late last year when it launched a hostile campaign to wrestle the company from the streaming giant by consistently raising its offer.
The company, led by billionaire Larry Ellison's son David Ellison, enticed Warner's board back to the bargaining table by raising the possibility of an improved cash offer.
In its revised bid, Paramount raised the termination fee it would pay should the deal fail to gain regulatory approval to $US7 billion from $US5.8 billion.
Paramount paid the $US2.8 billion termination fee that Warner Bros owed Netflix, the streaming giant said in a regulatory filing.
Activist investor Ancora Holdings, which owns a small stake in Warner Bros, had also stepped up pressure on the HBO owner to engage more with Paramount.
Politicians on both sides of the political aisle have raised concerns that any deal to acquire Warner Bros could result in fewer choices and higher prices for consumers.
Cinema operators are also concerned that combining large Hollywood studios could cost jobs and reduce the number of movies released in cinemas.
