Netflix (NFLX) has entered a deal to acquire Warner Bros. Discovery’s (WBD) film and television studios in a cash-and-stock transaction valued at about $82.7 billion. The acquisition is set to close in 12 to 18 months, following WBD’s planned spinoff of some of its linear TV networks. However, whether the transaction will go through remains uncertain as it is likely to face strict scrutiny from regulators due to concerns about market concentration.
TipRanks Cyber Monday Sale
- Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
The deal has an equity value of $72 billion and a total enterprise value of $82.7 billion, which includes debt. According to the terms, WBD shareholders will receive $23.25 in cash and about $4.50 in Netflix stock per share.
Under the deal, Netflix will gain control of Warner Bros. film and TV studios, the HBO and HBO Max streaming service, and iconic intellectual property, including the Harry Potter franchise, the DC Universe, Game of Thrones, and Friends.
Ahead of the deal completion, WBD’s global networks division, including cable channels such as CNN, TNT Sports, and Discovery, will be spun off into a separate publicly traded company called “Discovery Global.”
NFLX Expects Huge Cost Savings
Netflix projects at least $2 to $3 billion in annual cost savings by the third year after the deal closes, primarily through synergies and “optimizing its plans”. Also, the transaction is expected to be accretive to GAAP earnings per share by the second year.
Further, Netflix co-CEOs Ted Sarandos and Greg Peters stated the merger will provide “more choice and greater value for consumers” by combining libraries. Further, it will allow the company to expand its U.S. production capacity and original content investment.
The company argues that combining Netflix’s global reach with Warner Bros.’ renowned franchises and extensive library will offer more opportunities for the creative community to work with beloved intellectual property.
Will the Deal Go Through?
With Netflix already the dominant global streamer, adding HBO Max’s 128 million subscribers to its base of over 300 million could trigger antitrust concerns. The deal is expected to face significant scrutiny from U.S. and European regulators due to concerns about market concentration and potential impacts on competition.
U.S. lawmakers, including Senators Elizabeth Warren and Bernie Sanders, have already signaled skepticism, warning the Justice Department to scrutinize the merger closely.
“This deal looks like an anti-monopoly nightmare,” Warren said, warning it would create a streaming giant controlling nearly half the market, driving up prices, limiting choices, and putting workers at risk.
Is Netflix Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Netflix stock is Strong Buy, based on 28 Buy, seven Hold, and one Sell ratings over the past three months. The average NFLX stock price target of $139.13 reflects a potential 38.29% upside.
