How Netflix outbid Paramount and Comcast for Warner Bros. takeover
What's the story
In a major shake-up in the entertainment industry, Netflix has announced its acquisition of Warner Bros. Discovery for $82.7 billion, including debt. The deal is one of the largest media transactions in recent history and could change the global entertainment landscape. The move comes after Warner Bros Discovery rejected three unsolicited offers from Paramount Skydance and started an auction on October 21.
Strategic move
Netflix's strategy and Warner Bros's business units
Initially, Netflix was just curious about Warner Bros's business. But soon, the streaming giant realized the potential of the studio's extensive catalog of movies and TV shows for its subscribers. The value of library titles to streaming services is huge as they can account for up to 80% of viewing. Warner Bros's business units, especially its theatrical distribution and promotion unit and studio, were complementary to Netflix's operations.
Acquisition process
Acquisition journey and competition
The acquisition process intensified this autumn as Netflix went up against Paramount and Comcast for the assets. Paramount made three escalating offers for the media company in September, hoping to pre-empt Warner Bros's planned separation. At that time, JPMorgan Chase & Co was advising Warner Bros Discovery CEO David Zaslav to consider reversing the order of the planned spin-off, shedding its cable television assets first.
Deal approval
Netflix's final offer and regulatory challenges
Netflix's advisory team, including investment banks Moelis & Company, Wells Fargo and law firm Skadden, Arps, Slate, Meagher & Flom, held daily calls for two months to prepare a bid by the December 1 deadline. The Warner Bros board met daily in the last eight days leading up to their decision on Thursday when Netflix made its final offer. To allay fears over what is likely to be a lengthy regulatory review process, Netflix offered a $5.8 billion breakup fee.