Netflix Inc (NASDAQ:NFLX) is betting that regulators, rather than competitors, will decide the fate of its deal with Warner Bros. Discovery (NASDAQ:WBD), despite Paramount Skydance (NYSE:PSKY) arguing that the sale process has been biased and could complicate the transaction.
Summary of the agreement
Netflix announced that it had reached a definitive agreement to acquire Warner Bros., including its film and television studios and the HBO and HBO Max businesses, in an all-cash and stock transaction valued at approximately £70 billion in enterprise value.
Netflix has stated that the transaction values Warner Bros. Discovery at $27.75 per share, implying an equity value of approximately $72 billion.
Auction context
The agreement is the result of a fierce bidding war in Hollywood in which Netflix won exclusive negotiating rights after a turbulent final round of bids that also included Paramount Skydance.
Business reports differ on the winning price during the auction, with Deadline putting the bid at £20 per share and The Wrap reporting that Netflix reached a target of £20 per share.
Although both described the talks as focusing on Warner Bros.’ famous film and television studios and the HBO Max streaming service, along with iconic properties such as Harry Potter and the DC Universe.
Paramount Skydance objections
Paramount Skydance has alleged that Warner Bros. Discovery’s auction was biased and potentially predetermined in favour of Netflix.
According to a report by CNBC, Paramount Skydance sent a letter to Warner Bros. Discovery chief executive David Zaslav proposing the formation of a special independent committee to oversee the process.
The letter raised concerns about potential management conflicts related to incentives and warned that even the appearance of favouritism could harm shareholder value and increase the risk of any deal.
Approvals and timetable
Netflix stated that both boards of directors unanimously approved the agreement, which remains subject to regulatory approvals, approval by Warner Bros. Discovery shareholders, and other customary closing conditions.
The deal is expected to close after Warner Bros. Discovery completes the planned separation of its Global Networks business into a new publicly traded company, Discovery Global, which is now expected to occur in the third quarter of 2026.
Consideration and synergies
Under the terms of the agreement, Warner Bros. Discovery shareholders will receive $23.25 in cash and $4.501 in Netflix common stock per share at closing, with the stock portion subject to a collar linked to Netflix’s 15-day VWAP, measured three business days prior to closing.
Netflix has stated that it expects to maintain Warner Bros.’ current operations, including theatrical film releases, and anticipates annual savings of between $2 billion and $3 billion in the third year, with the transaction expected to increase earnings per share on a GAAP basis in the second year.
Netflix price evolution
Netflix shares fell 4.37 per cent to £98.71, while Warner Bros. Discovery shares rose 2.12 per cent to £25.06 during pre-market trading on Thursday, according to data from Benzinga Pro.
Source: Yahoo!Finanzas
