Netflix acquires Warner Bros. and HBO Max in $82.7B deal, bidding war with Paramount-Skydance continues

Summary

Netflix announced Friday it will acquire Warner Bros. Discovery's studio, streaming, and HBO assets for $82.7 billion in enterprise value, or $72 billion in equity at $27 per share. The deal excludes WBD's cable channels—CNN, TNT, TBS, and Discovery—which will be spun off. Netflix expects $2–3 billion in annual cost savings by year three and EPS accretion by year two.

The acquisition caps a weeks-long bidding war involving Paramount-Skydance and Comcast. Netflix co-CEO Ted Sarandos said the company will maintain Warner Bros.' theatrical operations and HBO as a discrete service while integrating HBO and HBO Max content into Netflix's broader platform.

Regulatory headwinds and valuation debate

Netflix's stock fell 2.6% on the announcement. Martin Pearce of The Information called it an "$82.7 billion blunder," arguing that Netflix is paying 27.5 times next year's expected earnings, well above prevailing multiples for film and TV companies, for businesses unlikely to add meaningful subscribers given Netflix's market saturation. Pearce also flagged severe regulatory obstacles.

Jason Kilar, former Warner Media CEO, contended the deal reduces competition in Hollywood. Ben Weiss countered that legacy media companies need scale to compete with Silicon Valley giants such as Apple, Amazon, Google, and Meta, and that preserving competition between legacy players risks winning a battle while losing the war.

The regulatory path appears uncertain. Netflix's political alignment differs from Paramount-Skydance, which observers suggest may face less scrutiny under the Trump administration. As of reporting, Paramount and Skydance were reportedly preparing a hostile bid at $30 per share, claiming their all-cash offer exceeds Netflix's blended value.

IP and merchandising upside

Adam Faze highlighted an often-overlooked angle. Netflix would gain control of Warner Bros.' animated IP library, including Looney Tunes characters (Bugs Bunny, Daffy Duck, Porky Pig, Wile E. Coyote, Roadrunner), DC Comics properties (Batman, Superman, Wonder Woman, The Flash, Aquaman), and Hannah-Barbera franchises (Space Ghost, Johnny Quest, Scooby-Doo). Faze argued this unlocks billions in merchandising and new platform versions of iconic franchises.

Debt and cash flow math

Netflix will take on $50 billion in debt to complete the deal. The company generates roughly $10 billion in annual free cash flow and can service the debt. WBD's studio and streaming operations generated $2.3 billion in EBITDA in the first nine months of the year, with Netflix expecting $3 billion next year. At the deal price, Netflix calculates a 14.3x EBITDA multiple after accounting for $2.5 billion in expected cost savings, above the 11x multiples at which Disney and Paramount-Skydance trade.

Market positioning

Polymarket odds show Netflix favored at 86% to acquire WB, with Paramount at 6% and Amazon at a single-digit percentage. The deal closes after WBD's spin-off of its cable division in Q3 2026, leaving substantial time for regulatory review and competitive maneuvering.