This is reportedly one of the biggest media and entertainment deals in corporate history
Skadden, Arps, Slate, Meagher & Flom LLP, Debevoise & Plimpton LLP, and Wachtell, Lipton, Rosen & Katz have confirmed their roles in streaming giant Netflix’s billion-dollar acquisition of Warner Bros Discovery (WBD) - reportedly one of the biggest media and entertainment deals in corporate history.
The two entertainment behemoths announced on Friday December 5 that they had entered into a definitive agreement for Netflix to pick up Warner Bros. Discovery, Inc along with its film and television studios, HBO, and the streaming service HBO Max. The deal is set to close once WBD’s global networks division Discovery Global has split off into a new publicly traded entity – a transaction that is expected to be completed in 2026’s third quarter according to Skadden.
Netflix and WBD’s boards both unanimously approved the acquisition, which is pending regulatory approval. The merger is set to complete in 12-18 months.
Netflix co-CEO Ted Sarandos said in a Netflix press release that the acquisition would facilitate the combination of the two brands’ entertainment libraries and “help define the next century of storytelling.” Co-CEO Greg Peters added that the merger would bolster Netflix’s offering and accelerate its business.
“With our global reach and proven business model, we can introduce a broader audience to the worlds they create—giving our members more options, attracting more fans to our best-in-class streaming service, strengthening the entire entertainment industry and creating more value for shareholders,” Peters said in a statement.
Netflix indicated that it was likely to maintain Warner Bros’ existing operations, capitalizing on aspects like theatrical film releases. It would also maximize consumer plans with the integration of the Warner Bros library, which includes the DC Studios movies and the Harry Potter film franchise.
Netflix added that the merger would improve its studio capabilities, broadening its US production capacity considerably and enhancing investment in original content in the long run. This is expected to generate jobs in the industry and enable its creative team to work with other intellectual properties.
Definitive agreement details
The total enterprise value of the deal comes to ~US$82.7 billion, with an equity value of US$72 billion. WBD is valued at US$27.75 per share.
Once the deal closes, WBD shareholders will get US$23.25 in cash and US$4.50 in Netflix common stock shares, reflective of a 10% symmetrical collar, for each share of WBD common stock outstanding. The stock value is dependent on the 15-day volume weighted average price (VWAP) of Netflix’s stock price dropping into the US$97.91 and US$119.67 range. (determined three trading days before closing). WBD shareholders receive 0.0460 Netflix shares per WBD share if the VWAP is under US$97.91; they receive 0.0376 Netflix shares per WBD share if the if the VWAP exceeds US$119.67.
In addition to bolstering revenue and operating income, the deal is anticipated to save Netflix at least US$2-3 billion in costs annually by the third year. The acquisition is expected to be accretive to GAAP earnings per share by the second year.
Antitrust concerns
The announcement of the acquisition was met with backlash from trade association Cinema United, the Writers Guild of America, and Producers Guild of America. US senators Elizabeth Warren and Roger Marshall also criticized the deal.
“Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite. Theaters will close, communities will suffer, jobs will be lost,” Cinema United CEO Michael O’Leary said in a statement published by the Associated Press.
The Writers Guild of America called for the merger to be rejected.
“The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent. The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers,” the guild wrote in a statement on its website. “Industry workers along with the public are already impacted by only a few powerful companies maintaining tight control over what consumers can watch on television, on streaming, and in theaters. This merger must be blocked.”
The Producers Guild of America said Netflix faced a key test with the deal.
“As we navigate dynamic times of economic and technological change, our industry, together with policymakers, must find a way forward that protects producers’ livelihoods and real theatrical distribution, and that fosters creativity, promotes opportunities for workers and artists, empowers consumers with choices, and upholds freedom of speech,” the guild wrote in a LinkedIn post. “This is the test that the Netflix deal must pass.”
Warren said in a statement published by AP News that the deal appeared to be “an anti-monopoly nightmare,” while Marshall highlighted the “serious red flags for consumers, creators, movie theaters and local businesses alike.”
Deal teams
Skadden advised Netflix; the team on the transaction included M&A partners Kenton King (Palo Alto), Sonia Nijjar (Palo Alto), Lauren Kramer (New York) and associate Corey Janson (New York); antitrust/competition partners Steven Sunshine (Washington, D.C.) and Joseph Rancour (Washington, D.C.) and counsel Bradley Pierson (Washington, D.C.); intellectual property and technology partner Ken Kumayama (Palo Alto); capital markets partner Michelle Gasaway (Los Angeles and Houston); banking partner Leila Sayegh (Los Angeles); tax partner Nathan Giesselman (Palo Alto); executive compensation and benefits partner Page Griffin (Palo Alto and New York); and labor and employment law partner Ryne Posey (Los Angeles and Palo Alto).
Netflix tapped Moelis & Company LLC as its financial advisor, along with Wells Fargo as additional financial advisor. Wells Fargo, BNP, and HSBC are providing committed debt financing for the transaction.
Debevoise advised WBD with a team headed up by M&A partners Jonathan Levitsky, Gordon Moodie, Katherine Durnan Taylor, and Erik Andrén. The team also included partners John Love, Jeffrey Rosen and William Regner; counsel Sarah Jacobson and Molly Stockley; associates Amanda Blazek, Robert Geren, Grace Huang, Richard Hughes, Rekha Korlipara, Victoria Li, Tomohiro Numahata, and Zoë Zissu; and law clerks Jason Bach, Tyler Lorenzen and Nicholas Paruta.
Also pitching in were finance partners Jeffrey Ross and Ramya Tiller; counsel Jonathon Yeung; associates Talia Lorch and Marta Poplawski; capital markets partners Matthew Kaplan and Benjamin Pedersen; associates Emily Espinel, Jasmine Fong, Alice Gu, Ramsha Khursheed, and Maayan Stein; tax partners Erin Cleary and Peter Schuur; counsel Ben Lee Friedman; associates Olivia Coral Daniels, Harshil Mehta, and Isabel Shipman; employee benefits and executive compensation partner Simone Hicks; of counsel Lawrence Cagney; counsel Wendy Widman; associates Gregory Kramer, Alexandra Schoellkopf, and Samuel Siegel; intellectual property partner Henry Lebowitz; associates Yinran Pan and Natalie Mauch; and law clerk Alice Zheng.
Wachtell also advised WBD with a team consisting of corporate partners Andrew J. Nussbaum and Karessa L. Cain; associates Hannah Clark, Steven A. Jaffe, and Jacob D. Pearlman; tax partner Deborah L. Paul; and litigation partners William Savitt and Ryan A. McLeod.
WBD engaged Allen & Company, J.P. Morgan, and Evercore as financial advisors.
