Netflix to buy Warner Bros film and streaming businesses for $72bn

Netflix has agreed to buy Warner Bros Discovery’s film and streaming businesses for $72bn (£54bn) in a major Hollywood deal.

The streaming giant became the highest bidder for Warner Bros. after a protracted battle, ahead of rivals Comcast and Paramount Skydance.

Warner Bros. owns franchises like Harry Potter and Game of Thrones and the streaming service HBO Max.

The takeover is expected to lead to a radical reshaping of the US film and media industry, but analysts have warned it could face resistance from competition authorities.

Netflix co-chairman Ted Sarandos said that by combining Warner Bros.’ library of shows and movies like Casablanca with the streaming platform’s series like Friends, we can “give audiences more of what they love and help them define the next century of storytelling.”

“Warner Bros. defined the last century of entertainment, and together we can define the next century,” he said.

Calling it a “big day” for the companies, Mr. Sarandos said the acquisition may have surprised some shareholders but acknowledged it was a “rare opportunity” for Netflix to succeed “for decades to come.”

David Zaslav, chairman and chief executive of Warner Bros., added that the deal would combine “two of the greatest storytelling companies in the world.”

“By teaming up with Netflix, we will ensure people around the world continue to enjoy the world’s most resonant stories for generations to come,” he said.

The cash-and-stock deal values ​​Warner Bros. at $27.75 per share, giving the company a total enterprise value of approximately $82.7 billion, including the value of its debt and shares. The equity value or cash price is $72 billion.

Both boards of directors of each company unanimously approved the agreement.

The acquisition of Warner Bros. is expected to allow Netflix to expand its studio production capacity and increase its investment in original content.

Netflix will complete the acquisition after Warner Bros. finalizes its previously announced plans to split its streaming and studio division from its global network division into two publicly traded companies next year.

The global networks division includes cable channels like CNN, as well as sports brands and free-to-air channels in Europe.

Paolo Pescatore, founder of PP Foresight and technology media and telecom analyst, said the sale “is a major statement of intent and underlines Netflix’s ambition to be a global leader in the new world streaming order.”

However, the “surprising move” was made by Warner Bros. He warned that it made sense for Netflix, but that it would “create a headache for Netflix.”

“This is uncharted waters, and previous major media acquisitions have been executed poorly. If and when approved, Netflix will need to focus very sharply on integration and execution,” he said.

Although the agreed deal is for a portion of Warner Bros.’ business, rival Paramount submitted an offer to buy the entire company, including its cable networks, in October.

Warner Bros rejected the move before putting him up for sale.

Ahead of Friday’s announcement, Hargreaves Lansdown’s chief investment strategist Emma Wall said the US competition regulator would be involved regardless of who wins.

“This will create a global megapower in broadcast entertainment that the regulator will want to examine,” he said.

Tom Harrington, head of television at Enders Analysis, said it was difficult to gauge whether the deal would win regulatory approval, but if it did it would have a big impact on cinema.

“If that happens, Hollywood’s direction would change again, with a streamer acquiring a business to which it is existentially the antithesis. Netflix has always had a limited use for cinema, but its overall offering undermines it,” he said.

Mr Harrington said there would likely be “major reductions” in television and film output from a combined organisation, leading to resistance to the move from some sections of Hollywood and relevant unions.

“HBO, the creative gem, would be horribly exposed at Netflix, but it has survived difficult owners for most of its existence,” he said.

Mr Harrington said the merger would likely lead to higher costs for consumers.

“Netflix will become more expensive, and even if HBO Max is shut down/ceased, greater penetration of Netflix households will likely mean an increase in total overall subscription revenues.”