DOJ Launches Antitrust Probe into Netflix-Warner Bros. Deal
The U.S. Department of Justice has launched a sweeping antitrust investigation into Netflix’s proposed acquisition of Warner Bros. Discovery. The probe is reportedly scrutinizing Netflix's potential leverage over content creators and its impact on competition in Hollywood, signaling growing regulatory unease with media consolidation. This investigation could delay or reshape the terms of any transaction, affecting deal certainty for all parties involved.
- The Department of Justice is invoking both the Clayton Act, which is standard for merger reviews, and the Sherman Act, a statute typically used for targeting illegal monopolization, signaling a deeper and more complex investigation than usual. - A competing, all-cash bid for the entirety of Warner Bros. Discovery has been made by Paramount Skydance for $108.4 billion, a higher valuation than Netflix's offer which is solely for the studio and streaming assets. - Netflix amended its initial cash-and-stock offer to an all-cash transaction valued at $27.75 per WBD share, or approximately $82.7 billion, to provide greater certainty to shareholders and expedite the path to a shareholder vote scheduled for March 20, 2026. - To finance the acquisition, Netflix has already secured $25 billion in new credit agreements, including a $5 billion revolving credit facility and $20 billion in term loans. - Pro forma financials for the deal project that it will become accretive to Netflix's earnings per share after the second year, with management anticipating $3 billion in cost synergies. - The combined entity's net debt to free cash flow ratio is expected to jump to approximately 5x post-acquisition, with a plan to deleverage to below 3x by 2028. - Since announcing its bid for Warner Bros., Netflix's stock has fallen 28%, indicating significant market concern over the acquisition's debt and regulatory risks. - As part of its pitch to regulators and theater owners, Netflix co-CEO Ted Sarandos has committed to maintaining an exclusive 45-day theatrical release window for all Warner Bros. films.
