Warner Bros (WBD) Stock: Netflix Beats Paramount and Comcast in Bidding War

TLDR

• Netflix entered exclusive negotiations to buy Warner Bros. Discovery’s studios and HBO Max for $28 per share in a mostly cash deal
• The streaming company is offering a $5 billion breakup fee if regulators block the transaction
• Warner Bros. stock rose 4.3% premarket while Netflix fell 0.6% on the announcement
• Netflix beat competing bids from Paramount Skydance and Comcast to win exclusive negotiating rights
• The deal faces antitrust scrutiny from US and European regulators with concerns already raised by California and Utah lawmakers

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Netflix has locked down exclusive talks to acquire Warner Bros. Discovery’s film and TV studios plus HBO Max. The deal is priced at $28 per share, mostly in cash.

Warner Bros. Discovery, Inc., WBD

The streaming leader is putting up a $5 billion breakup fee if regulators kill the transaction. That safety net helped Netflix beat out Paramount and Comcast for exclusive negotiating rights.

Warner Bros. stock jumped 4.3% in premarket trading Friday. Netflix shares slipped 0.6%. The deal could be announced within days if talks stay on track.

Warner Bros. will spin off cable channels like CNN, TBS, and TNT before closing the sale. The company put itself up for sale in October after fielding interest from multiple buyers.

Netflix Goes Big

This marks the largest acquisition attempt in Netflix history. The company built its $437 billion market value without owning a major studio. It licensed content from others, then invested heavily in original programming.

The purchase would give Netflix ownership of HBO and its show library. Warner Bros. assets include the Burbank studios and a huge film and TV archive. A combined company would control about 450 million subscribers.

Paramount CEO David Ellison started the bidding war with unsolicited offers. His company later accused Warner Bros. of running an unfair process favoring Netflix. A December 3 letter from Paramount lawyers called the auction “tainted.”

Paramount argued its bid had a better chance with regulators. Netflix’s $28 per share offer beats Paramount’s earlier bid of roughly $24 per share.

Regulatory Roadblocks

The deal faces serious antitrust questions in the US and Europe. California Republican Darrell Issa wrote regulators opposing any Netflix transaction. He warned it could hurt consumers.

Utah Senator Mike Lee raised similar concerns this week. Netflix counters that YouTube is a major competitor. The company claims the deal would lower consumer prices through bundling.

Bloomberg Intelligence analysts say the bid implies a $75 billion equity valuation. The massive subscriber base will trigger regulatory scrutiny. Netflix finished 2024 with $39 billion in revenue. Warner Bros. had more than $39 billion in sales.

Hollywood Reacts

The entertainment industry is watching nervously. Netflix rarely gives films theatrical releases. The company occasionally does limited cinema runs for original movies.

Traditional TV is shrinking fast as viewers switch to streaming. Warner Bros. cable division saw revenue drop 23% last quarter. Subscribers are canceling and advertisers are moving elsewhere.

Warner Bros. iconic content would help Netflix stay ahead of Disney and Paramount. The deal represents different entertainment eras merging. Netflix launched as a DVD rental service almost three decades ago. Warner Bros. was founded in the 1920s.

Netflix’s $5 billion breakup fee shows serious commitment to closing the deal despite regulatory hurdles ahead.

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