A Strategic Milestone for Netflix as Acquisition Path Clears

Netflix finds itself at a pivotal moment, with its proposed acquisition of Warner Bros. Discovery (WBD) marking a bold strategic shift. The streaming giant's $82.7 billion offer, however, has weighed on its share price, which currently trades approximately 30% below its record high. Investor apprehension surrounding the deal's substantial cost is now being countered by a significant development from the target company's leadership.

The Board of Directors at Warner Bros. Discovery has issued a definitive recommendation to its shareholders. In a statement released Wednesday, the board advised rejecting a competing, unsolicited cash offer from Paramount Skydance of $30 per share, labeling that proposal as "inadequate and illusory." Instead, the leadership is throwing its support behind the negotiated agreement with Netflix, which values WBD at $27.75 per share through a combination of cash and stock.

In a direct communication to WBD shareholders, Netflix co-CEOs Ted Sarandos and Greg Peters highlighted key advantages of their proposal:

• Assured Financing: The deal is backed by committed financing from leading financial institutions.
• No CFIUS Review: The transaction does not require approval from the Committee on Foreign Investment in the United States.
• Substantial Breakup Fee: A $5.8 billion reverse termination fee is in place should the deal fail on regulatory grounds, noted as the largest such fee in the history of public M&A.
• Expected Timeline: Closure of the acquisition is anticipated within 12 to 18 months.

Market Sentiment Shifts as Bidding War Appears to Conclude

A notable shift in market sentiment occurred as WBD's stock price recently dipped below the value of Netflix's offer. This movement is widely interpreted as a signal that traders now view the contest as effectively decided, with Paramount Skydance seen as having a low probability of altering the outcome.

Should investors sell immediately? Or is it worth buying Netflix?

From a strategic standpoint, successfully acquiring WBD would grant Netflix control over the Warner Bros. and HBO film and television studios. This would bring iconic franchises, including "Game of Thrones," "Harry Potter," and the DC Universe, under the streaming service's umbrella.

Debt Concerns Loom Over Strategic Rationale

Despite this strategic victory, the financial implications remain a primary concern for Netflix investors. Completing this acquisition would significantly increase the company's debt load—potentially to $75 billion. This figure approaches three times its annual EBITDA. Currently, Netflix shares trade at a price-to-earnings ratio of nearly 40, leaving little room for operational disappointments.

Alongside pursuing this major acquisition, Netflix is advancing its diversification strategy. New exclusive partnerships with iHeartMedia and Barstool Sports, set to begin in early 2026, aim to bring popular video podcasts to the platform, broadening its sports and entertainment content.

Antitrust scrutiny remains a final hurdle. Netflix has argued that the combined entity would account for only 9.2% of total U.S. television viewing time—less than YouTube or Disney. Nonetheless, concerns over concentrated market power persist. Concrete insights into the deal's financial viability are expected on January 20, 2026, when Netflix reports its fourth-quarter 2025 earnings.