It is one of the biggest media deals ever.
In one of the biggest media deals ever, Netflix (NASDAQ:NFLX) has acquired Warner Bros from Warner Bros Discovery (NASDAQ:WBD) for a whopping $82.7 billion.
The streamer is buying just the Warner Bros side of the house, so that includes the film studios and all of its properties, including the Harry Potter franchise and Superman and the DC universe, along with the entire movie catalog. It also includes HBO Max, HBO, and its television studios.
The Discovery side of the business, to be called Discovery Global, will be spun off as planned into a separate, publicly traded company. Discovery includes the company’s TV properties, including CNN, Discovery, TNT, among others.
Netflix had been one of the major suitors for Warner Bros., along with Paramount Skydance and Comcast, so that was not a shock. But it was a bit surprising how it all went down.
Netflix offered $27.75 per share for WB, which exceeded a reported $27 per share offer from Paramount for the entire company, including Warner Bros and Discovery. But then CNBC reported Friday that Paramount upped its final offer Thursday evening to $30 per share, citing people close to the matter.
The equity value of the deal is $72 billion, but the enterprise value is pegged at $82.7 billion, making it one of the largest media deals ever and the biggest since AT&T acquired Time Warner in 2018.
Netflix paid a hefty premium over the $24 WBD share price, as of Thursday’s close, for just WB. Investors initially balked at the deal, as Netflix shares were down about 4% at the open, but then by 10:00 a.m. ET, the stock price was essentially flat, trading at around $103 per share.
Warner Bros Discovery stock rose about 3% to over $25 per share, which would be expected for a $27.75 per share price.
A “rare opportunity”
The deal is expected to close after the Discovery Global spinoff is complete, which is anticipated in Q3 2026.
“Our mission has always been to entertain the world,” Ted Sarandos, co-CEO of Netflix, said. “By combining Warner Bros’ incredible library of shows and movies—from timeless classics like Casablanca and Citizen Kane to modern favorites like Harry Potter and Friends—with our culture-defining titles like Stranger Things, KPop Demon Hunters and Squid Game, we’ll be able to do that even better.”
On the call with analysts after the deal was announced, Sarandos acknowledged what many were thinking.
I know some of you are surprised that we’re making this acquisition, and I certainly understand why. Over the years, we have been known to be builders, not buyers,” Sarandos said, reported CNBC. “We already have incredible shows and movies and a great business model, and it’s working for talent, it’s working for consumers and it’s working for shareholders. This is a rare opportunity.”
Cost savings and accretive to EPS in year two
Netflix officials said the company will maintain Warner Bros’ current operations, including its theatrical releases for films.
As for HBO and HBO Max, the company said, “adding the deep film and TV libraries and HBO and HBO Max programming, Netflix members will have even more high-quality titles from which to choose. This also allows Netflix to optimize its plans for consumers, enhancing viewing options and expanding access to content.”
What that integration looks like and how it may affect pricing is unclear, but those answers will emerge in the months ahead.
Regarding financials, Netflix said it expects the acquisition to “attract and retain more members, drive more engagement and generate incremental revenue and operating income.”
Further, Netflix expects to see $2 billion to $3 billion in cost savings per year by the third year. And it projects the acquisition to be accretive to earnings per share by year two.
“This acquisition will improve our offering and accelerate our business for decades to come,” Greg Peters, co-CEO of Netflix, said.
The deal calls for each WBD shareholder to receive $23.25 in cash and $4.501 in shares of Netflix common stock for each share of WBD common stock outstanding at the closing of the transaction.
“For more than a century, Warner Bros has thrilled audiences, captured the world’s attention, and shaped our culture. By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come,” David Zaslav, president and CEO of Warner Bros Discovery, said.
There wasn’t much analyst feedback as of press time, but Huber Research downgraded Netflix stock to underweight and lowered the price target to $92 per share, calling it a “very risky” transaction for the high price and the change in strategy it will require.
