Warner Bros. Discovery stock (NASDAQ: WBD) has exploded higher after Netflix confirmed a blockbuster agreement to acquire Warner Bros.’ film, TV and streaming businesses in a cash‑and‑stock deal valuing the enterprise at about $82.7 billion (equity value $72 billion). [1]
On Friday, December 5, WBD shares closed at $26.07, up roughly 6.2% on the day, after trading as high as $26.10. That’s right at a new 52‑week high and far above the 12‑month low of $7.52, meaning the stock has climbed around 140% over the past year. [2]
At the same time, the stock is still trading at a discount of about 6% to the agreed takeover price of $27.75 per share, reflecting the market’s view of regulatory and timing risks around closing one of the biggest media deals of the decade. [3]
This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
Deal terms: $27.75 per share and a reshaped Hollywood
Under the definitive agreement announced on December 5, Netflix will acquire Warner Bros., including the film and TV studios, HBO, and HBO Max, after Warner Bros. Discovery completes a planned spin‑off of its Global Networks division (to be called Discovery Global) into a separate publicly traded company. [4]
Key elements of the deal:
- Consideration per WBD share:
- $23.25 in cash
- $4.50 in Netflix stock (delivered via a collar structure)
- Implied value: $27.75 per WBD share, equating to $72.0 billion in equity value and $82.7 billion in enterprise value. [5]
- Structure & timing:
- WBD will first separate its Global Networks business (CNN, Discovery, TNT Sports and related channels plus Discovery+ and Bleacher Report) into Discovery Global.
- Netflix then acquires the remaining Warner Bros. studios and streaming operations (including HBO and HBO Max).
- The separation is now expected to complete in Q3 2026, with the Netflix transaction projected to close 12–18 months from announcement, subject to regulatory and shareholder approvals. [6]
- Stock‑component collar:
- WBD holders will receive Netflix stock valued at $4.50 per WBD share, as long as Netflix’s 15‑day VWAP (volume‑weighted average price) stays between $97.91 and $119.67.
- Outside that range, the share exchange ratio is fixed, shifting more of the risk to WBD holders if Netflix stock moves sharply. [7]
- Financing & breakup fee:
- Debt financing is being provided by Wells Fargo, BNP Paribas and HSBC.
- Netflix and WBD expect $2–3 billion in annual cost synergies by year three.
- A breakup fee of about $5.8 billion applies if Netflix walks away, according to deal reporting. [8]
For WBD investors, the economic anchor is now that $27.75 per‑share consideration, plus whatever value ultimately attaches to the spun‑off Discovery Global shares. Exact spin‑off ratios will be detailed in forthcoming SEC filings.
A bidding war, a lower headline price — and why Netflix won
Netflix did not win by offering the highest reported price per share.
According to Reuters, Paramount Skydance offered about $30 per share for Warner Bros. Discovery in an earlier bid, backed by the Ellison family, while Comcast also explored a combination involving NBCUniversal. [9]
Despite that higher nominal price, Warner Bros. Discovery’s board ultimately opted for Netflix’s offer, which:
- Provided a large cash component plus liquid Netflix stock.
- Preserved Warner Bros.’ identity as a major studio and pledged to maintain wide theatrical releases rather than turning the company into a pure “content farm” for a rival streamer. [10]
- Came from the largest global streaming platform, potentially simplifying commercial relationships for HBO Max and Warner Bros. content around the world.
Reuters’ deep‑dive on “how Netflix won Hollywood’s biggest prize” describes the process: what began as a fact‑finding mission by Netflix turned into a full-blown bidding war, as WBD’s strategic review and strong studio performance convinced multiple suitors that Warner Bros. was the rare media asset worth paying up for. [11]
How WBD stock has moved: from distressed to “deal stock”
The takeover caps a dramatic recovery in WBD’s share price:
- Closing price (Dec 5, 2025): $26.07, up 6.23% on the day. [12]
- 52‑week range: $7.52 – $26.10. [13]
- 1‑year performance: WBD has returned roughly 140–145% over the past year, according to historical data. [14]
- Market cap: Around $64–65 billion at current prices, based on StockAnalysis estimates of 2.48 billion shares outstanding. [15]
Entertainment trade outlets and financial media note that the stock is now trading around its highest level in more than three years, a striking turnaround from the post‑merger slump in 2022–2023. [16]
Given the agreed take‑out price of $27.75, Friday’s close at $26.07 leaves a deal spread of about $1.68 per share, or roughly 6% below the offer. In classic merger‑arbitrage fashion, that gap reflects:
- The time value of money over a 12–18 month closing period.
- The market’s assessment of regulatory risk, particularly U.S. and EU antitrust scrutiny.
- Some uncertainty about the eventual trading value of Discovery Global after the spin‑off.
Q3 2025 snapshot: Streaming and studios shine, linear networks drag
The deal is landing just weeks after Warner Bros. Discovery reported solid third‑quarter 2025 results that highlighted both the company’s strengths and its structural challenges.
According to WBD’s filings and third‑party coverage: [17]
- Revenue:
- Q3 2025 revenue was about $9.0 billion, down 6% year‑over‑year on a constant currency basis.
- Excluding the one‑time impact of sublicensing 2024 Olympic rights in Europe in the prior year, revenue was roughly flat versus Q3 2024. [18]
- Profitability:
- Net loss attributable to shareholders was about $148 million, driven largely by $1.3 billion in non‑cash amortization of intangibles and restructuring charges tied to the Discovery–WarnerMedia merger.
- Adjusted EBITDA reached roughly $2.5 billion, up around 2% year‑over‑year on a constant‑currency basis. [19]
- Streaming & Studios (the businesses Netflix is buying):
- WBD added 2.3 million net streaming subscribers in the quarter, taking its global base to about 128 million, up 16% year‑over‑year, with a company target of 150 million by the end of 2026. [20]
- The combined Streaming & Studios division grew revenue 7% and adjusted EBITDA 59% year‑over‑year (ex‑FX), powered by higher streaming margins and strong performance at Warner Bros. Pictures. [21]
- The studio became the first major studio to pass $4 billion at the 2025 global box office, despite releasing only 11 films, with hits across DC, horror and prestige titles. [22]
- Global Linear Networks (the business being spun into Discovery Global):
- Linear TV revenue and EBITDA declined double digits year‑over‑year, even excluding Olympic comparisons, reflecting cord‑cutting and weaker traditional TV advertising. [23]
- Balance sheet and cash flow:
- WBD generated about $701 million in free cash flow in Q3, even after roughly $500 million of separation‑related costs.
- The company repaid $1.2 billion of debt, ending the quarter with roughly $34.5 billion in gross debt, about $4.3 billion in cash and net leverage around 3.3x. [24]
In a detailed post‑earnings analysis titled “Warner Bros. Discovery Q3 2025 Earnings Reveal Why Buyers Are Circling,” Seeking Alpha highlighted streaming and gaming as key differentiators, emphasized improving free‑cash‑flow and deleveraging trends, but rated the stock a “Hold” on fundamentals absent corporate action. [25]
In other words: Netflix is paying a takeover premium for an asset that was just beginning to show the operating metrics suitors like to see — profitable streaming, a resurgent studio, and a still‑leveraged but gradually improving balance sheet.
Strategic backdrop: from break‑up plan to Netflix mega‑deal
The Netflix transaction sits on top of a broader restructuring story that has been building all year.
- June 2025 — Two‑company plan:
WBD announced a plan to split into two publicly traded entities:- WBD Streaming & Studios (Warner Bros. Pictures, HBO/HBO Max, games and related IP)
- WBD Global Networks (linear TV networks, sports and news). [26]
- October 2025 — Strategic alternatives:
The board then launched a formal review of strategic options, including the potential sale of part or all of the company. PPC Land’s timeline notes a series of milestones: unsolicited approaches, a separation plan, then an escalation into a full‑scale auction. [27] - Multiple suitors:
- Paramount Skydance, backed by the Ellison family, reportedly made three offers, culminating in the $30 per‑share bid. [28]
- Comcast explored a structure that would merge NBCUniversal with WBD’s assets.
- Netflix initially hired advisers to evaluate a potential bid, then formally joined the auction as the board’s review intensified. [29]
- December 5, 2025 — Netflix wins:
After weeks of competitive bidding, Netflix was named the preferred bidder, with a deal structure that dovetails into WBD’s planned separation and offers a mix of cash, Netflix stock and regulatory narrative about strengthening — not weakening — the broader entertainment ecosystem. [30]
For current WBD shareholders, the value proposition now hinges less on WBD as an ongoing stand‑alone turn‑around and more on deal mechanics, antitrust outcomes and the eventual value of Discovery Global.
Analyst forecasts and valuation: targets below the deal price
Analyst models were built for a world where WBD remained independent. As of December 6, most formal 12‑month price targets sit well below both the current share price and the agreed $27.75 take‑out value.
Key snapshots:
- StockAnalysis (23 analysts):
- Consensus rating: “Buy.”
- Average 12‑month price target: $18.89, implying around –27.6% downside from the latest price.
- Target range: $10 to $28 per share. [31]
- MarketBeat (28 analysts):
- Consensus: “Moderate Buy.”
- Average target: $21.92, about –16% below the current price of roughly $26.08.
- High target: $30; low target: $10. [32]
- Investing.com (20 analysts):
- Consensus rating: “Buy.”
- 13 analysts rate WBD a buy, 12 a hold (no sells), with an average target near $22.5 and the same $10–30 range on estimates. [33]
A few immediate reactions to the Netflix deal underline how quickly the narrative is shifting:
- Barrington Research downgraded WBD from “Outperform” to “Market Perform” on December 5, explicitly citing the takeover agreement. [34]
- Benchmark reiterated a “Buy” rating the same day, highlighting WBD’s strategic value and potential upside embedded in the deal and spin‑off structure. [35]
Because most of these targets were set before the final Netflix terms were announced, they should be treated as representing the market’s view of WBD as a stand‑alone entity. The relevant reference point for shareholders is now the $27.75 per‑share consideration plus Discovery Global — not the old price targets.
From a pure valuation standpoint, StockAnalysis data suggest that at current prices WBD trades at: [36]
- Trailing‑12‑month revenue of about $37.9 billion,
- Trailing net income around $0.5 billion,
- Implied P/E above 130x, reflecting low GAAP earnings and heavy amortization,
- And a market cap near $64.6 billion, still below the $72 billion equity valuation Netflix is willing to pay.
The gap between intrinsic valuation estimates and the bid price is precisely what takeover premiums are made of.
Regulatory storm clouds: unions, producers and antitrust scrutiny
A deal this large — and this strategically significant — will not glide through approvals unchallenged.
Recent developments:
- Hollywood unions push back:
A coalition including the Writers Guild of America (WGA East and West), Teamsters and cinema lobby group Cinema United has called the merger an “unprecedented threat,” arguing it would shrink theatrical release windows, reduce jobs and concentrate too much power in a single streaming platform. They are urging regulators to block the deal entirely. [37] - Film producers lobby Congress:
A separate consortium of film producers, reportedly including several high‑profile filmmakers, sent a letter to U.S. lawmakers warning of a “looming economic and institutional crisis” if Netflix acquires Warner Bros. Discovery. The group demanded the deal receive “the highest level of antitrust scrutiny.” [38] - Regulators and politicians:
Early commentary from antitrust watchers suggests the transaction will face intense review in both Washington and Brussels, given the prospect of combining the largest global streamer with a top‑tier studio, HBO and a massive content library. [39]
Netflix argues the combination will:
- Expand production in the U.S.,
- Preserve theatrical releases,
- Deliver more content choice at competitive prices, and
- Generate the $2–3 billion in cost savings that help fund future investment. [40]
Whether regulators agree — or insist on conditions such as divestitures, commitments on theatrical windows or limits on exclusivity — will be a central driver of where WBD stock trades relative to its $27.75 “ceiling” in the months ahead.
What all this means for WBD shareholders
From here, Warner Bros. Discovery stock behaves less like a classic media equity and more like a deal‑driven security whose path is dominated by a small set of binary questions:
- Does the Netflix deal close substantially as agreed?
- If yes, today’s WBD stock price converges toward the value of $23.25 in cash + $4.50 of Netflix stock + Discovery Global shares, adjusted for the time to closing and any changes in Netflix’s share price. [41]
- If no, WBD reverts to a stand‑alone valuation — but in a world where the board has already signaled openness to strategic alternatives and competing bidders (Paramount Skydance, Comcast and others) have shown willingness to pay. [42]
- How valuable will Discovery Global be as an independent networks company?
Investors will need to assess a predominantly linear TV business that is facing secular decline but still generates substantial cash flow, including CNN, TNT Sports, Discovery and various free‑to‑air and cable channels worldwide. [43] - How do Netflix and Warner Bros. execute during a long integration runway?
The deal is scheduled to close in 12–18 months, giving plenty of time for macro shocks, advertising cycles, box‑office surprises and shifts in streaming economics to influence both WBD and Netflix shares. [44]
For now, the key takeaways for anyone tracking Warner Bros. Discovery stock are:
- The fundamental story — profitable streaming, a powerful studio, heavy but shrinking leverage — made WBD an attractive M&A target and underpins the rich multiple Netflix is paying. [45]
- The market story has flipped from a turnaround trade to a merger‑arbitrage situation tied to antitrust outcomes, deal timing and the valuation of Discovery Global.
- Street forecasts and legacy price targets, which mostly sit in the high‑teens to low‑20s per share, now matter far less than the legally binding $27.75 per‑share consideration and the probability distribution around deal closing. [46]
References
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