Netflix’s Proposed Acquisition of Warner Bros. Discovery
Netflix, the dominant player in the streaming industry with a market cap of $357 billion, has proposed an all-cash acquisition of certain assets from Warner Bros. Discovery at $27.75 per share, valuing the transaction at approximately $72 billion. This deal involves Netflix utilizing $20 billion of its cash reserves and accruing $52 billion in debt, leading to an enterprise value of $82.7 billion. The proposal, announced on December 5, has led to a 16% drop in Netflix shares as of the latest update.
If completed, Netflix aims to achieve annual cost savings of $2 billion to $3 billion by the third year post-acquisition, with expected accretive earnings per share by year two. Historically, the effectiveness of such large mergers and acquisitions is questionable, as KPMG reports indicate that 57% of similar deals between 2012 and 2022 resulted in destroyed shareholder value within two years.
