Analysis of Netflix's All-Cash Acquisition of Warner Bros. Discovery

Based on collected data and news materials, I provide a comprehensive analysis of this major media industry M&A transaction.

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On January 20, 2025, Netflix filed a document with the U.S. Securities and Exchange Commission (SEC), announcing that it will revise the terms of its acquisition of Warner Bros. Discovery (WBD), changing the original “cash + common stock” combined payment method to

, while maintaining the per-share consideration of unchanged[0][1].

Item	Original Transaction Structure	Revised Transaction Structure
Payment Method	$23.25 in cash + approximately $4.50 in Netflix stock	All-cash payment
Equity Value	Approximately $72 billion	Approximately $72 billion
Enterprise Value	Approximately $82.7 billion (including debt)	Approximately $82.7 billion (including debt)
Shareholder Voting Time	TBD (To Be Determined)	Expected to be completed by April 2026

The revised transaction is still subject to WBD’s completion of the spin-off of its “Global Networks” business; the new company formed after the spin-off will be listed independently under the name “Discovery Global”, and WBD shareholders will additionally receive share value from this company[2].

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1. Significantly Enhanced Valuation Certainty
   : The all-cash transaction eliminates valuation uncertainty caused by fluctuations in Netflix’s stock price. Under the original transaction structure, the $4.50 stock consideration would change with Netflix’s share price, leading to the risk of volatility in the final settlement value[1].

2. Significant Premium Space
   : Comparing the acquisition price of $27.75 with WBD’s then share price of approximately $9.77, the implied acquisition premium is as high as
   approximately 184%
   , providing shareholders with a highly attractive exit price[0].

3. Additional Value Capture
   : In addition to receiving $27.75 in cash, WBD shareholders will also share in the value of the spun-off Discovery Global, reflecting the additional attractiveness of the transaction[2].

1. Capital Allocation Considerations
   : The all-cash transaction means Netflix will need to utilize significant cash reserves and credit lines. According to its official statement, the transaction funding sources include: existing cash, available credit lines, and a committed financing package[2].

2. Financial Flexibility
   : Netflix emphasized that its strong cash flow generation capacity can support the all-cash transaction while maintaining a healthy balance sheet and future strategic flexibility[2].

3. Debt Pressure
   : The enterprise value of $82.7 billion (including debt) will significantly increase Netflix’s debt ratio, and the market has already had an initial reaction—Netflix’s pre-market stock price fell 3.5%-4% after the news was announced[1].

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One of the key motivations for Netflix to revise the transaction structure is to counter the competing acquisition offer from

[3]:

Item	Netflix Offer	Paramount Skydance Offer
Per-Share Price	$27.75 (all-cash)	$30 (all-cash)
Acquisition Scope	Excludes Global Networks business	Full acquisition (including Global Networks)
Assets	Film and television production business, HBO, HBO Max	All assets

Paramount Skydance is led by David Ellison (son of Larry Ellison, founder of Oracle), and has offered a higher price of $30 per share, and is willing to acquire all WBD assets, including cable TV networks such as CNN and TNT[3].

1. Accelerate Shareholder Voting
   : The revised all-cash structure aims to advance the WBD shareholder voting date to April 2026, which is significantly earlier than the original plan[1][2].

2. Antitrust Argument
   : Netflix’s legal team has put forward the “category ambiguity” theory, arguing that in the face of competition from social media platforms such as YouTube, the streaming market should not define monopoly boundaries in the traditional manner[3].

3. Commitment to Concessions
   : Netflix has committed to WBD that if the acquisition is successful, it will renew Warner Bros.’ theatrical distribution agreements and continue to license TV programs to third parties—this represents a significant departure from its long-standing “exclusive content” strategy[3].

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This transaction marks the entry of the streaming industry into a

. Analysts generally believe that with the current overcrowding of market participants, unsustainable business models, and inefficiency and profit dilution caused by fragmentation, consolidation has become an inevitable trend[1][3].

Platform	Pre-Acquisition Status	Post-Acquisition Change
Netflix	Global No. 1 (market share ~20%+)	Market share jumps to 30%+, becoming the undisputed leader
Disney+	Second tier (Marvel, Star Wars, Pixar)	Facing increased competitive pressure
HBO Max	Third	Integrated into Netflix
Peacock	Owned by NBCUniversal	Operates independently, in an awkward position

If the transaction is completed, Netflix will acquire the following top-tier IP assets[1][3]:

• Film IPs
  : Harry Potter franchise, DC Universe, The Matrix franchise, Dune franchise
• TV Series IPs
  : Game of Thrones, Friends, The Big Bang Theory
• Production Capabilities
  : Warner Bros.’ century-long film industry experience, HBO’s original series production team
• Distribution Network
  : Global theatrical relationships, traditional TV distribution channels

Although Netflix cannot directly enter the Chinese mainland market, through the acquisition of Warner Bros., it will indirectly participate in the Chinese entertainment market through

. Warner Bros. films have long been able to be screened in Chinese theaters, and works such as Dune and Fantastic Beasts have achieved excellent box office results. This means that future box office revenue from Chinese audiences will ultimately flow to Netflix[1].

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1. Antitrust Review
   : After the merger of Netflix and HBO Max, the combined market share will exceed 30%, which may trigger antitrust scrutiny from the U.S. Department of Justice and the European Commission[2][3].

2. Political Factors
   : Paramount Skydance has hired Makan Delrahim, former antitrust chief of the Trump administration, as its chief legal officer, and his political and business resources may have an impact on regulatory decisions[3].

1. Precondition of Spin-Off
   : The transaction requires the completion of the Discovery Global spin-off first, which is expected to take 6-9 months[2].

2. Huge Breakup Fee
   : If the transaction fails due to regulatory or other reasons, Netflix will need to pay billions of dollars in compensation[1].

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Netflix’s revision of its WBD acquisition structure from cash + stock to all-cash is a

move:

• For WBD shareholders
  : Gain higher valuation certainty and a significant premium
• For Netflix
  : Enhance transaction execution certainty, counter competing offers, and accelerate the completion of the acquisition
• For the industry
  : Profoundly reshape the global streaming competitive landscape and promote industry consolidation

This transaction is not only about whether Netflix can rise to become a true Hollywood top studio giant, but also marks the strategic transformation of streaming platforms from “content distributors” to “full industry chain controllers”. If successfully completed, it will set a new competitive benchmark for the global media industry.

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[0] Cnyes - “Netflix Switches to All-Cash Acquisition of WBD to Boost Transaction Certainty and Accelerate Shareholder Voting” (https://news.cnyes.com/news/id/6316730)

[1] Sina Finance - “The $82.7 Billion Game: How Will the Streaming Battle Be Rearranged After Netflix Acquires Warner?” (https://finance.sina.com.cn/stock/t/2025-12-06/doc-infzwira5543405.shtml)

[2] Netflix Official News - “Netflix and Warner Bros. Discovery Amend Agreement to All-Cash Transaction” (https://about.netflix.com/en/news/netflix-and-warner-bros-discovery-amend-agreement-to-all-cash-transaction)

[3] The Paper - “Year-End Hollywood Bombshell: Netflix Breaks Its ‘Rule’ and Joins the Tripartite Bidding for Warner’s Over $70 Billion Sale” (https://m.thepaper.cn/newsDetail_forward_32055805)

[0] Jinling AI Market Data