Netflix to Acquire Warner Bros. in Historic $82.7 Billion Deal

In a landscape-shifting move that might redefine the global entertainment industry, Netflix (NASDAQ: NFLX) has entered into a definitive agreement to acquire Warner Bros. Discovery’s (NASDAQ: WBD) premier assets. Valued at an enterprise value of $82.7 billion, the deal combines the world’s leading streaming service with a century-old Hollywood studio with a treasure trove of intellectual property.

This comes after weeks of speculation as to who would acquire these assets. Initially, it seemed like Paramount was the lead horse in the race with Comcast and Netflix trailing behind but it was Netflix that made the most palatable offer. It does seem like Paramount’s leadership feels like they had an equally attractive offer on the table and maybe be looking at additional moves so perhaps this story isn’t done yet. All that’s clear is that potentially this deal is far from done and as with all acquisitions, even if this is the end as far as offers go, Netflix won’t actually own the WBD assets for at least another year as they await the WBD split and gather all regulatory approvals.

The Deal Structure: A Complex Financial Offer

The acquisition is not a simple buyout; it is the culmination of a strategic restructuring of Warner Bros. Discovery that they announced a couple of months. The transaction takes advantage of WBD’s plan to separate their linear and unscripted assets from its scripted studio and streaming jewels, effectively allowing Netflix to acquire exactly what it needs while leaving the declining linear business behind.

The Separation of Discovery Global

Before Netflix closes the deal, Warner Bros. Discovery will complete the separation of its Global Networks division into a standalone, publicly traded company tentatively called Discovery Global. At the same time they will spin off their Streaming & Studios business which is what Netflix is buying here.

• What Netflix Gets: The Warner Bros. business(A.K.A. Streaming & Studios below), which includes the Warner Bros. Motion Picture and Television studios, the DC Universe, HBO, and the HBO Max streaming service plus WB Games, New Line Cinema and TNT Sports international.
• What Remains (Discovery Global A.K.A. Global Networks above): Premier linear entertainment, sports, and news brands, including CNN, TNT Sports (U.S.), Discovery Channel, Discovery+, Cartoon Network, Eurosport, and digital assets like Bleacher Report.

Consideration and Valuation

For the Warner Bros. assets, Netflix is paying a hefty premium. The transaction values the acquisition target at $27.75 per WBD share, implying a total equity value of $72.0 billion. They’re also taking on $10.7B in debt from WBD for a total enterprise value of $82.7B which means that the Linear Networks business will have slightly less debt to worry about.

That’s a nice offer for a stock that pretty recently traded in the $8 range prior to all these acquisition rumors. It’s also a hefty premium to the $19 that Paramount was rumored to offer initially for the entire company, not just Streaming & Studios. Paramount raised their offer since then but it wasn’t enough to overcome what Netflix had on the table.

Shareholders of WBD will receive a mix of cash and equity for their stake in the acquired business, comprised of:

• Cash: $23.25 per share.
• Stock: $4.50 per share in Netflix common stock.

The Stock Collar Mechanism

To protect value for both parties, the stock component is subject to a 10% symmetrical collar. The exchange ratio depends on Netflix’s 15-day volume-weighted average price (VWAP) measured three days prior to closing:

• Base Case: $4.50 in value.
• Downside Protection: If Netflix stock drops below $97.91, WBD shareholders receive a fixed 0.0460 shares per WBD share (more shares to maintain value) but since it’s a fixed number, it’s possible that the overall value of these shares is less than 4.50 depending on how low the stock drops.
• Upside Cap: If Netflix stock rises above $119.67, shareholders receive 0.0376 shares per WBD share and just like above, since this is a fixed number, it’s possible that the overall value of these shares is above 4.50 depending on how high the stock goes.

Financing the Mega-Deal

Netflix is leveraging its strong balance sheet to fund this purchase. The $50 billion in acquisition debt will be combined with $10.3 billion in cash on hand in addition to the net debt they’re taking on from Streaming & Studios and the equity consideration. Despite this leverage, Netflix’s CFO Spence Neumann has committed to maintaining solid investment-grade credit ratings through rapid post-close debt reduction. Netflix is a pretty cash generative company so this shouldn’t be a huge concern for shareholders for Netflix although the stock does have a tendency to punish acquirers especially ones that take on debt to acquire in the short term.

What This Means for WBD Shareholders

For long-suffering Warner Bros. Discovery shareholders, this deal represents a significant unlocking of value that the market had previously failed to recognize in the combined entity.

Immediate Liquidity and Premium Valuation

The $23.25 cash component provides immediate, certain liquidity at a valuation that far exceeds WBD’s trading price prior to the rumor mill spinning up. By cashing out the studio and streaming portion of the business, shareholders get an upfront payout while avoiding the volatile streaming wars that has a lot of competitors and not one clear winner(besides Netflix). While it’s possible that WBD would have done well on it’s own as a standalone entity post split, the value unlock would have taken a while to happen.

Continued Upside via Netflix Equity

The $4.50 stock component ensures that WBD shareholders don’t just exit; they pivot. By converting a portion of their holdings into Netflix stock, they retain exposure to the upside of the combined entity. If the Netflix + Warner Bros. synergy works as promised, former WBD shareholders will participate in that growth. If they want more exposure, they can just buy Netflix stock with the cash they receive from the deal as well.

Ownership of Discovery Global

Beyond that, WBD shareholders also retain ownership of the newly spun-off Discovery Global company. This entity, while far from a growth stock, does house cash-cow assets like CNN and TNT Sports. It will focus on paying down debt(of which there is less due to Netflix taking on $10B) and will likely eventually pay dividends and operate as a focused linear TV stock. That might not be a super appealing investment but the assumed valuation of this left over company is likely to be very low so long term, it might still produce some decent returns. There is also a possibility that a company like this eventually merges with the assets Comcast is spinning off and while these types of assets may not look great on paper, they’re still cash flow machines that investors might be able to ride as long as linear TV keeps ticking.

Strategic Rationale: Why Netflix is Making this Bet

Why would Netflix, a company that famously disrupted the studio model, spend over $80 billion to buy a traditional Hollywood studio? The answer lies in Intellectual Property (IP), Production Capacity, and Theatrical Presence.

The Ultimate IP Vault

Netflix has spent billions building franchises from scratch (Stranger Things, Squid Game and more), but that takes time and luck. With this acquisition, Netflix instantly owns a century of culture-defining IP.

• The DC Universe: Netflix finally has its answer to Disney’s Marvel even if superhero movies seem to be less popular than they were just a few years ago. Ownership of Superman, Batman, Wonder Woman, and Aquaman allows Netflix to build cinematic universes that can span decades if handled well.
• Wizarding World: Ownership of the Harry Potter franchise gives Netflix a crown jewel that appeals to every demographic globally. In fact, HBO is already working on a Harry Potter series that will cover all the books which means years and years of likely very popular content.
• Prestige TV: The acquisition of HBO brings the prestige name in house and great TV shows like The Wire, The Sopranos, Game of Thrones, The White Lotus, and The Last of Us—under the Netflix banner.
• Film Legacy: From Casablanca and The Wizard of Oz to The Matrix and Lord of the Rings, the depth of the library is unmatched.

Synergies and Financial Growth

Netflix expects to realize $2-3 billion in annual run-rate cost savings by the third year. These synergies will likely come from:

• Consolidating streaming tech stacks (migrating HBO Max subscribers to the Netflix platform even if they keep the two services as standalone subscriptions).
• Reducing redundant administrative and marketing costs.
• Streamlining global distribution networks and producing their own content instead of using third-parties to do it.

Financially, the deal is expected to be accretive to GAAP EPS by the second full year, creating a more profitable engine that can reinvest in even more content and also pay down that debt faster. That’s on top of being an obvious top-line driver and likely help churn via a bundle offering.

Expanding into Theatrical Releases

Perhaps the most surprising shift is Netflix’s commitment to maintain Warner Bros. current operations… including theatrical releases for films. This signals a mature phase for Netflix. They are no longer just a streamer; they are a full-spectrum entertainment ecosystem. They will likely use theatrical runs to build hype for major franchises (like Batman or Harry Potter) before they arrive exclusively on Netflix, maximizing revenue per title. While this sounds good on paper, I think many are skeptical that a historically movie theater averse company like Netflix really means to join the theater game for the long long term or if this is just something they’ll say now to appease regulators and change their tune once the deal is done. Ted Sarandos already made a comment about potentially shorter theatrical windows as their overall strategy is to get as many people onto their streaming services as possible and more movies faster will certainly do that even if it means giving up some profits from the box office.

Implications for Competitors: The Streaming Wars are Over (Netflix Won)

This acquisition effectively signals the end of the streaming wars phase of fragmentation and the beginning of the great consolidation. Netflix has already been a winner in streaming in my mind with others not having a shot at catching up and fighting it out for #2 and this just makes that all that much clearer.

The Must-Have Service

By absorbing HBO Max’s library and Warner Bros.’ output, Netflix becomes an indispensable utility for households. The churn-reducing power of having Friends, The Big Bang Theory, Seinfeld (which Netflix already licensed), and Grey’s Anatomy alongside all of Netflix’s services all in one place is immense. The ability to offer a Netflix and HBO bundle for one low price will make for a killer value proposition as people look to get the most bang for their buck and the ability to produce your own content will make the margins on that even better.

Pressure on Disney, Amazon, and Apple

• Disney: Disney+ is now the only true peer to Netflix in terms of IP depth (Marvel/Star Wars vs. DC/Harry Potter) and production capacity. The rivalry will intensify, but Netflix now has the edge in prestige adult drama via HBO. Netflix likely looks to the bundle offering of Disney+ and Hulu as something they can replicate by offering an HBO Max tile within the Netflix app.
• Amazon & Apple: These tech giants have tons of cash but lack the deep historical library. They may be forced to make acquisitions of their own (perhaps looking at Paramount or Sony Pictures or even Lionsgate) to compete with the sheer volume of Netflix’s new catalog. Apple also lacks any sort of production capacity which places them at a disadvantage.
• Peacock & Paramount+: Mid-tier streamers will find it increasingly difficult to justify their subscription fees when Netflix offers a library that is effectively double the size of its nearest competitor. It’s no surprise that both wanted to acquire WBD and why Paramount will likely keep pressing to prevent this deal and get their own done.

Regulatory Hurdles and Timeline: Will the Deal Pass?

This is the key part of this deal. While it all sounds good on paper, this deal is far from guaranteed. A merger of this magnitude—combining the largest streamer with one of the largest studios—will face intense scrutiny from the Department of Justice (DOJ) and the Federal Trade Commission (FTC) in the US, as well as the European Commission.

The Antitrust Argument

Regulators will be concerned about vertical integration.

• Concern: Will Netflix favor its own movies in theaters? Will it refuse to license WB content to other linear networks? Will the two streaming services hold too much pricing power and if combined, will they remove choice from consumers.
• Counter-Argument: Netflix can argue that the market remains highly competitive with strong rivals like Disney, Amazon, Paramount, and Apple. Furthermore, by spinning off the linear networks (Discovery Global), they are avoiding a monopoly on television news and sports, which are sensitive areas for regulators.

Vertical vs. Horizontal

This is primarily a vertical merger (distribution acquiring production), which courts have historically been more lenient toward than horizontal mergers (two direct competitors merging). However, since WBD owns HBO Max, there is a horizontal component. It is highly likely that regulators might require some guarantees around HBO Max and Netflix and may demand things that ensure Netflix continues to license content to others.

Another part of this deal is that it was likely happening one way or another. Is Netflix’s acquisition less harmful to consumers than Paramount acquiring WBD or Comcast? At least with Netflix, a major studio isn’t taken off the table like it would be with Paramount or Comcast who already have their own sizable studios.

The Timeline

The deal is expected to close in 12 to 18 months, placing the completion date around late 2026 or early 2027.

1. Phase 1: Separation of Discovery Global (Expected Q3 2026).
2. Phase 2: Shareholder Approvals (Netflix and WBD).
3. Phase 3: Regulatory Review (Concurrent with Phase 1 & 2).

At this point, the decision will likely rest with the DOJ. It seems like there’s some rumors of favoritism in the form of Paramount being more likely to be approved than Netflix but whether that’s true remains to be seen. It’s quite possible Paramount comes in with a higher offer and this gets more complicated but for now investors will just have to wait and see what the government has to say about it. For WBD shareholders, one must remember that there is also a $5B+ break-up fee that Netflix would have to pay WBD if the deal is squashed and Netflix has to walk away which would be beneficial to the standalone business if that’s how the cookie crumbles.

Conclusion

The Netflix acquisition of Warner Bros. is a watershed moment. It transforms Netflix from a tech disruptor into the ultimate Hollywood player with their own production facilities and a treasure trove of IP. For WBD shareholders, it is a lucrative exit ramp. For consumers, it promises a massive aggregation of content, likely followed by a streamlined—and perhaps more expensive—subscription landscape which is always the worry with these types of events. It also makes the future of theaters uncertain as one of the bigger box office players is being acquired by a company that historically has avoided theaters. As the industry holds its breath for regulatory review, one thing is clear: the era of the mega-studio has arrived and this likely isn’t the last merger if this is allowed to go through.

As a WBD shareholder, I’m happy with this result and will take some of my substantial returns and look for the next investment opportunity while I wait and see how this plays out. For more details on this merger, you can watch my video on the subject here.

Disclaimer: I am long WBD. This article is based on deal documents and press releases provided as of December 2025. Financial projections and regulatory outcomes are subject to change. This article is for informational purposes only and does not constitute financial or investment advice. The author is not a registered investment advisor. All investment strategies and investments involve risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Please consult with a professional financial advisor before making any investment decisions.