Netflix Agrees to Acquire Warner Bros. Studio and HBO Max After Paramount-Led Bidding Battle

The months-long contest for control of Warner Bros. Discovery’s crown-jewel assets has ended, for now, with Netflix striking a $27.75-per-share agreement to purchase the Warner Bros. film studio and the HBO Max streaming service. The equity value of the transaction is about $72 billion and follows a competitive process set in motion last September when Paramount Skydance Chief Executive Officer David Ellison first approached Warner Bros. Discovery’s board about a potential merger.

Under the terms unveiled on Friday, Warner Bros. Discovery (WBD) will spin off its global pay-television networks — including CNN, TNT Sports and the Discovery channels — before the deal closes. Shareholders will receive shares in the newly separated company, tentatively labeled Discovery Global, while retaining their stakes in the remaining studio and streaming business that Netflix plans to absorb.

Ellison’s Overture Triggers a Sale Process

Ellison had quietly sent multiple letters to the WBD board beginning in early September, each proposing higher valuations and arguing that Warner Bros.’ library, intellectual property and streaming platform would combine effectively with Paramount’s own assets. His initiative prompted WBD to launch a structured auction that ultimately attracted Paramount, Netflix and Comcast’s NBCUniversal.

Before news of Ellison’s first approach surfaced, WBD shares traded at $12.54 on Sept. 10. By the time Netflix’s agreement was announced, the stock had more than doubled, rising above $25 in Friday morning trading. The surge restored the company’s market capitalization to levels last seen in 2022, when AT&T’s WarnerMedia merged with Discovery.

Windfall for Chief Executive David Zaslav

The price secured by Netflix delivers a substantial gain to WBD Chief Executive Officer David Zaslav. Company filings show Zaslav currently holds about 4.2 million shares, with a further 6.2 million scheduled to vest from earlier stock awards. He also possesses options on roughly 20.9 million additional shares exercisable at $10.16 apiece. At the agreed sale price, those holdings are worth more than $554 million. An additional four million shares expected to vest in January would lift the total to roughly $660 million.

Rank-and-file shareholders benefit as well; the jump in WBD’s share price since September represents a gain of more than 100 percent. The sharp recovery offers Zaslav a measure of vindication after nearly four years of criticism from investors and Hollywood insiders who argued that WBD’s post-merger integration and streaming strategy lagged behind rivals.

Paramount Contests the Outcome

Despite losing the initial contest, Paramount insists its proposal remains the superior option. According to people familiar with the negotiations, Paramount tabled an all-cash bid of $30 per share for the entire company, including the linear-TV networks. Company attorneys sent a letter to WBD this week claiming the auction favored Netflix from the outset and contending that the board did not fully evaluate Paramount’s offer.

Paramount’s advisers value the soon-to-be-spun-off cable networks at close to $2 per share, based on projected public-market multiples and leverage ratios. WBD’s own projections suggest a valuation of $3 per share or higher if Discovery Global trades well after its listing. Paramount also argues that purchasing the whole company would offer tax efficiencies to shareholders and expose the transaction to fewer regulatory hurdles.

Both bids include significant break-up fees to compensate WBD if regulators block the deals. Paramount offered a $5 billion fee, while Netflix’s filing with the U.S. Securities and Exchange Commission shows a $5.8 billion provision.

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Next Steps: Possible Hostile Tender

People close to Paramount say the company is weighing whether to take a higher offer directly to WBD shareholders, a move that would escalate the contest and compel Netflix to match or exceed any improved bid. A hostile tender could lift WBD’s sale price still further, increasing returns for shareholders and, by extension, for Zaslav and other senior executives.

The uncertainty adds another twist to Ellison’s tenure at Paramount Skydance, which began in August when Skydance completed its merger with Paramount Global. Since then, the company has recruited new C-suite leadership, signed the Duffer Brothers to an exclusive deal, acquired rights to produce a live-action Call of Duty feature film and secured a $7.7 billion agreement for Ultimate Fighting Championship broadcast rights.

For Netflix, the pending acquisition enhances its content pipeline and strengthens its position against traditional media conglomerates that have struggled to match the streaming service’s global scale. Co-CEO Ted Sarandos told analysts the timing made sense because WBD’s prior restructuring had clarified which assets were available and how they could be separated.

Regulatory reviews in the United States and key international markets are expected to begin later this year. Individuals familiar with the process say officials in the current administration are examining the competitive implications closely, while some members of the former Trump administration have expressed skepticism about permitting the combination.

Unless Paramount returns with a higher offer, Netflix’s agreement positions it to absorb one of Hollywood’s most storied studios and its streaming sibling, leaving Paramount and Comcast’s NBCUniversal without an immediate large-scale merger target. Whatever the final outcome, the process has already amplified the value of WBD — and notably enriched the executives steering its sale.

Crédito da imagem: Patrick T. Fallon | AFP | Getty Images