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Netflix Wins the Battle for Warner Bros. Why the Stock Is Dropping.

Dec 05, 2025 06:41:00 -0500 by Adam Clark | #M&A

Netflix could add properties like Harry Potter to its portfolio with an acquisition of Warner Bros. Discovery. (Mario Tama/Getty Images)

Key Points

Netflix has agreed to buy Warner Bros. Discovery in a nearly $83 billion deal, following the planned spinoff of Warner’s global cable network operations.

The deal values Warner Bros. Discovery at $27.75 a share: $23.25 in cash and the remainder paid in Netflix stock. That implies a total equity value of approximately $72 billion and an enterprise value of around $82.7 billion.

Netflix shares were down in early trading, battled back to flat, and then dropped again—its stock was down 0.9% at $102.31 at 11:08 a.m. Warner shares were up 3.8% to $25.47, heading for its highest close since April 2022.

The deal is set to be by far Netflix’s biggest-ever acquisition and will bring it control of rights to beloved characters including Batman and Harry Potter. However, there may be antitrust concerns amid fears that it could hand the streamer too much power over Hollywood.

“While we think the Department of Justice is more likely than not to challenge a Netflix deal, there are elements of a Trump Transaction Tax that Netflix could pay that might result in the deal being approved,” wrote New Street Research analyst Blair Levin in a research note before the deal was announced.

Potential measures Netflix could take to soften political opposition might include a commitment to make movies and series in the U.S. President Donald Trump has repeatedly threatened to impose a 100% import tax on films produced abroad.

Netflix looks to already be preparing its arguments, saying in a statement that the acquisition would allow it to significantly expand U.S. production capacity and increase investment in original content.

HBO and its streaming service HBO Max will continue to operate as a stand-alone platform, Netflix co-CEO Ted Sarandos said on an investor call. Netflix also said it will continue to release Warner movies in theaters.

“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,” said Netflix co-CEO Greg Peters in a statement.

The deal has angered Paramount Skydance, which has accused Warner of favoring its rival bidder.

Paramount wrote in a Wednesday letter to Warner Discovery Chief Executive David Zaslav that the company has “embarked on a myopic process with a predetermined outcome that favors a single bidder,” which it believed to be Netflix, the Wall Street Journal reported.

Warner, Netflix and Paramount didn’t immediately respond to requests for comments early on Friday. People familiar with the matter confirmed the letter’s accuracy to Barron’s.

“In our view, Paramount Skydance is unlikely to back off and will mount a continued challenge beyond its five reported prior bids,” wrote Benchmark Research analyst Matthew Harrigan in a research note.

However, Paramount could face a tough task to outbid Netflix. Harrigan said the value of the entire Warner business might now stand at more than $30 a share.

Warner is currently moving ahead with plans to separate into two companies, one comprising the studio and streaming assets and the other containing its global cable network operations. Paramount sought to buy the whole company, while Comcast and Netflix have presented offers for the streaming and studios segment, not the cable channels.

Netflix’s deal for Warner is expected to close after the separation of the cable division, named Discovery Global, into a new publicly-traded company. That is expected to happen in the third quarter of 2026.

Netflix expects the combination with Warner to result in at least $2-3 billion of cost savings per year by the third year of the deal’s completion, and expects it to add to its earnings per share by year two.

Write to Adam Clark at adam.clark@barrons.com