A Bidding War Erupts Over Warner Bros., Sending Netflix Shares Lower

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The streaming giant Netflix finds itself in a fiercely competitive takeover battle, facing significant pressure from a rival bid. Shortly after announcing a massive $82.7 billion acquisition of Warner Bros. Discovery on December 5th, the company was countered by a superior offer from Paramount Skydance made directly to Warner shareholders. This development has triggered a notable correction in Netflix's stock price and prompted a wave of analyst downgrades.

Central to investor concern is the proposed deal's financing structure, which would saddle Netflix with an additional $59 billion in debt. Furthermore, substantial uncertainty surrounds whether antitrust regulators will ultimately approve the transaction.

On December 8th, Paramount Skydance, led by CEO David Ellison, made a surprise move by presenting a competing, all-cash proposal of $30 per share directly to Warner Bros. Discovery stockholders. This bid values the target company at approximately $77.9 billion.

Ellison's strategy hinges on the argument that the Netflix agreement will fail to gain regulatory clearance. A combined Netflix and HBO Max would command a global subscriber base of roughly 420 million, representing a market share nearing 45%. Regulatory bodies typically begin scrutinizing deals when market concentration approaches 30%.

Regulatory Hurdles Pose Significant Risk

Market experts estimate a 35% to 40% probability that competition authorities will block the Netflix-Warner merger. Reports suggest the current administration views the proposal skeptically. Doug Creutz, an analyst at TD Cowen, warned of "significant regulatory scrutiny," stating that approval is "anything but certain."

In their defense, Netflix co-CEOs Greg Peters and Ted Sarandos highlighted the complementary nature of the content libraries and committed to preserving jobs during the UBS Global Media Conference. This was viewed as a veiled criticism of Paramount's approach, which targets $6 billion in synergies that would likely result in substantial workforce reductions.

The Core Netflix Deal: Terms and Concerns

Netflix's original offer stands at $27.75 per Warner Bros. Discovery share, comprising $23.25 in cash and $4.50 in Netflix stock. The acquisition would bring renowned film studios, the HBO Max service, and the HBO brand under the umbrella of the streaming market leader.

The plan to fund the deal with $59 billion in borrowed capital has alarmed the investment community. In response, Seaport Research Partners lowered its price target on Netflix from $138 to $115, while Pivotal Research Group downgraded its rating from "Buy" to "Hold."

Key Transaction Details:

• Total Enterprise Value: $82.7 billion
• Expected Annual Cost Synergies: $2-3 billion, beginning in year three
• Breakup Fee: Netflix would pay $5.8 billion if the deal collapses
• Expected Closing Timeline: 12 to 18 months

Wall Street's Divided Opinion

Analyst sentiment is mixed. Laura Martin of Needham maintains a $150 price target but questions the strategic rationale. She contends that Netflix is exposing "$83 billion of additional value to the risk of AI disruption," suggesting the company would be stronger without Warner's legacy studio operations.

The consensus among 46 covering analysts reveals a spectrum of views:

• 27 analysts recommend Strong Buy
• 3 analysts recommend Moderate Buy
• 14 analysts recommend Hold
• 2 analysts recommend Strong Sell
• The average price target is $131.34.

Strong Fundamentals Amid the Chaos

Despite the takeover turmoil, Netflix's underlying business performance remains robust. For the third quarter of 2025, revenue climbed 17% to $11.5 billion. Free cash flow reached $2.7 billion, and the company's cash reserves stand at $9.3 billion.

The streamer achieved record market shares in both the United States and the United Kingdom. Its advertising business is projected to more than double its revenue in 2025. With over 300 million paying subscribers across 190 countries, Netflix's position as the clear industry leader is unchallenged.

The outcome of this escalating bidding war is poised to reshape the streaming landscape for years. Warner Bros. Discovery shareholders face a decision between the two offers by mid-2026, assuming regulatory authorities allow the process to proceed.