By Harshit
LOS ANGELES, Dec. 5 —
Netflix stunned Hollywood and Wall Street on Friday after announcing a sweeping agreement to acquire Warner Bros. from Warner Bros. Discovery (WBD) in a colossal $82.7 billion enterprise-value transaction, marking one of the largest media acquisitions in U.S. history. The cash-and-stock deal values WBD at $27.75 per share, giving shareholders $23.25 in cash and $4.50 in Netflix stock.
The move will effectively bring together Netflix’s global streaming reach with Warner Bros.’ century-old creative powerhouse, consolidating some of the world’s most iconic entertainment franchises under one company. The acquisition comes after a competitive bidding war in which Netflix ultimately outmaneuvered Paramount–Skydance and Comcast.
Despite the strategic significance, Netflix stock fell 4% on Friday, reflecting investor caution toward the streamer’s aggressive capital commitment. Warner Bros. Discovery shares, by contrast, rose as much as 4%, signaling optimism about the premium valuation.
A Deal Structured Across Two Phases
The acquisition will not close immediately. Warner Bros. Discovery must first complete its previously announced separation of the Global Networks division—a spin-off that will create a standalone public company called Discovery Global, housing CNN, TNT Sports, Discovery channels in Europe, Discovery+, and Bleacher Report.
This separation, originally targeted earlier, is now expected to finalize in Q3 2026. Only after this restructuring will Netflix move to close the full Warner Bros. purchase—setting a transaction timeline of 12 to 18 months.
The equity value of the deal stands at $72 billion, with total enterprise value reaching $82.7 billion after including debt.
A Transformative Content Merger
The acquisition hands Netflix control of one of the world’s richest content libraries, including:
- DC Universe
- Harry Potter
- Friends
- Game of Thrones
- The Sopranos
- HBO and HBO Max
- Warner Bros.’ film studio and extensive production teams
These properties will join Netflix’s existing hit franchises such as Stranger Things, Wednesday, Squid Game, and Bridgerton.
Netflix co-CEO Ted Sarandos called the merger a “transformational moment,” stating the combination enables Netflix “to give audiences more of what they love.” Co-CEO Greg Peters emphasized Warner Bros.’ world-class production infrastructure and creative leadership.
WBD CEO David Zaslav described the merger as a coming together of two storytelling giants, noting it received unanimous board approval.
Investor Reaction: Skepticism Amid Strategic Ambition
Wall Street remains divided. The stock’s 4% decline reflects concerns about:
- The $72 billion capital outlay
- Potential regulatory hurdles
- Integration complexity
- Shifts in Netflix’s strategy toward theatrical distribution
Analysts warn that Netflix may face the toughest regulatory review of any bidder due to its dominance in streaming. Morgan Stanley’s Ben Swinburne wrote last month that Netflix had the “smallest opportunity for cost savings” among potential acquirers and would face “significant antitrust scrutiny.”
MoffettNathanson’s Robert Fishman previously argued Netflix was unlikely to participate in a bidding war—only to see the streamer ultimately submit the winning $27.75-per-share offer.
Theatrical Strategy Raises New Questions
A notable surprise in the deal is Netflix’s commitment to maintain Warner Bros.’ theatrical operations. The company historically viewed theaters as nonessential, with Sarandos previously calling regular theatrical releases an “outdated model.”
Yet Netflix now appears prepared to support Warner Bros.’ cinema-first strategy for major tentpole franchises, a shift some investors fear may dilute its streaming focus.
Financial Outlook: Cost Synergies and EPS Growth
Netflix projects $2–3 billion in annual cost savings by year three, driven by operational consolidation, technology integration, and shared production workflows. The company also expects the deal to become GAAP EPS-accretive by year two.
Netflix plans to expand domestic production capacity and increase annual investment in original content using Warner Bros.’ studios and creative teams.
The stock component of the transaction uses a collar mechanism, ensuring WBD shareholders receive $4.50 in Netflix stock based on a 15-day volume-weighted average price between $97.91 and $119.67.
Regulation, Shareholder Votes, and Financing
The deal requires:
- WBD shareholder approval
- Regulatory clearance in the U.S. and abroad
- Completion of the Discovery Global spin-off
- Standard closing conditions
Netflix is being advised by Moelis & Company and Skadden Arps, with debt financing from Wells Fargo, BNP, and HSBC. Warner Bros. Discovery is advised by Allen & Company, J.P. Morgan, and Evercore.