Netflix (NFLX) Buys Warner Bros. for $72 Billion in Major Streaming Expansion Move

Netflix Inc. (NASDAQ:NFLX) is among the best stocks you’ll wish you bought sooner.

On Friday, December 5, Netflix Inc. (NASDAQ:NFLX) announced the long-contested acquisition of Warner Bros. Discovery (NASDAQ:WBD) in a cash-and-stock deal. The enterprise value (EV) of the agreement is around $82.7 billion, and the equity value is $72 billion, substantially higher than Paramount’s initial $60 billion offer, which WBD had rejected. The EV includes Warner Bros. Discovery’s $10.7 billion in debt.

As per the deal, Netflix Inc. (NASDAQ:NFLX) will pay Warner Bros. shareholders $23.25 in cash and $4.50 in Netflix common stock, bringing the per share value to $27.75 for WBD equity. Of the total equity value, cash accounts for 84%, i.e., $60.3 billion, and the company plans to fund this part with $10.3 billion in cash on hand and $50 billion in acquisition debt. $11.7 billion is to be paid in stock.

The transaction is expected to close in 12-18 months, and before the deal closes, Warner Bros. is expected to complete the spinoff of its networks division, which includes cable channels such as TNT, CNN, and TBS.

Management expects the deal to deliver “at least $2 billion to $3 billion” in annual cost savings by the third year and to be accretive to GAAP EPS by the second full year.

Earlier, on December 3, Reuters reported that Netflix might be looking to push the idea of lowering costs by bundling its streaming services with HBO Max to bolster its case for acquiring Warner Bros. Discovery.

While none of the companies had confirmed or commented on this development, Reuters quoted sources close to the negotiations that by proposing lower costs, Netflix Inc. (NASDAQ:NFLX) is trying to allay regulatory concerns that the combination of two of the largest streaming services will mar competition and will lead to increased pricing.

While the bidding war intensified in recent weeks, analysts remained bullish on Netflix Inc. (NASDAQ:NFLX), with more than two-thirds of the analysts covering it holding a Buy or equivalent rating. As of the time of writing this article, the latest rating update was from Rosenblatt Securities analyst Barton Crockett, who reaffirmed a Buy rating on Netflix on November 28. He also revised his price target slightly to $152, down from $153.

Netflix Inc. (NASDAQ:NFLX) is a global streaming entertainment platform that offers on-demand media content across more than 190 countries through a subscription-based model.

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Disclosure: None. This article is originally published at Insider Monkey.