Looking to allay some concerns, Netflix said the deal would give subscribers more shows and films, boost its US production and long-term spending on original content and create more jobs and opportunities for creative talent.
The company argued in deal talks that a combination of its streaming service with HBO Max would benefit consumers by lowering the cost of a bundled offering.
The company has told Warner Bros Discovery it would keep releasing the studio’s films in cinemas in a bid to ease fears that its deal would eliminate another studio and major source of theatrical films, according to media reports.
Cash-and-stock deal
Under the deal, each Warner Bros Discovery shareholder will receive $US23.25 in cash and about $US4.50 in Netflix stock per share, valuing Warner at $US27.75 a share, or about $US72 billion in equity and $US82.7 billion, including debt.
The deal represents a premium of 121.3 per cent to Warner Bros Discovery’s closing price on September 10, before initial reports of a possible buyout emerged.
The deal is expected to close after Warner Bros Discovery spins off its global networks unit, Discovery Global, into a separate listed company, a move now set for completion in the third quarter of 2026.
Netflix has offered Warner Bros Discovery a $US5.8 billion breakup fee, while Warner Bros Discovery would pay Netflix $US2.8 billion if the deal collapses.
Netflix said it expects to generate at least $US2 billion to $US3 billion in annual cost savings by the third year, after the deal closes.
Netflix growth worries
Analysts have said Netflix is driven by a desire to lock up long-term rights to hit shows and films and rely less on outside studios as it expands into gaming and looks for new avenues of growth after the success of its password-sharing crackdown.
Its shares are up just 16 per cent this year, after surging more than 80 per cent in 2024, as investors worry its breakneck growth could be slowing, especially after it stopped disclosing subscriber figures earlier this year.
The company has leaned on its ad-supported tier to drive growth, but that is not expected to become a major revenue engine until next year, while analysts say its push into video games has stumbled amid strategy shifts and executive turnover.
Buying Warner Bros would also deepen its gaming bet, as WBD is one of the few entertainment companies to notch big successes in the sector, including its Harry Potter title Hogwarts Legacy, which has generated more than $US1 billion in revenue.
Reuters
