Netflix Preparing to Purchase Warner Bros and HBO for $82 Billion
Netflix has just agreed to buy up Warner Bros. and HBO in a massive deal worth more than $82 billion.
Quick overview
- Netflix has agreed to purchase Warner Bros. and its subsidiaries for $82.7 billion, pending regulatory approvals.
- If the deal fails, Warner Bros. will receive a $5.8 billion breakup fee, while Netflix anticipates annual cost savings of $2-3 billion.
- The acquisition will give Netflix access to a vast library of content, including HBO, CNN, and the DC Universe.
- Despite the potential benefits, Netflix's stock fell 3.7% amid concerns over the debt and management changes associated with the deal.
Netflix (NFLX) has agreed to purchase Warner Bros. and its subsidiary studios, which include HBO and HBO Max, all to the tune of $82.7 billion.
A deal has been struck between two of the biggest entertainment companies in the world- Warner Bros and Netflix. The video streaming service plans to buy Warner Bros., but the deal will have to wait on regulatory approvals, since the deal may run afoul of antitrust legislation.
Even if the deal falls through because the government does not grant its approval, Warner Bros. still stands to make $5.8 billion as a breakup fee. Netflix management anticipates cost savings of $2-3 billion per year once the deal is finalized, as they would then not have to pay to license content from Warner Bros.
What Would Netflix Receive?
By purchasing Warner Bros. and everything that comes with it, Netflix would gain access to Discovery Global, which includes Discovery+. It would also gain ownership of the Bleacher Report, TNT Sports, CNN, and the entire DC Universe lineup of movies and television shows.
Netflix would also own the full library of HBPO and Warner Bros. titles, including The Sopranos, Big Bang Theory, and Wizard of Oz. Netflix management says they intend to keep the current slate of DC Universe and Warner Bros. theatrical releases that are scheduled for the next few years. For now, consumers should not expect a shakeup with the already announced lineup of films.
Netflix has now won a lengthy bidding war against Comcast and Skydance. At this time, Netflix is in exclusive negotiations with Warner Bros., and barring regulatory issues, the deal is expected to go through.
How the Deal Impacts Netflix
By owning Warner Bros. and its affiliated properties, Netflix will be taking on $82.7 billion of enterprise value, which has an equity value of $72 billion. These numbers include Warner Bros.’ debt.
Netflix stock was trading down 3.7% in premarket trading for Friday. Investors expect the deal to create tremendous debt for the company and to require extensive shuffling of management positions. The deal should be finished in the next year or year and a half, and the WBD stock transactions are valued at $27,75 per share. All WBD shareholders will be issued $23.25 per share in cash as well as $4.50 in Netflix shares for each share of WBD that they hold.
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