Netflix Wins Bidding War, Agrees to Buy Warner Bros. In $72B deal 12/5/25

SPEAKER_1 (0:00)

Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet at fidelity.com/traderplus. Investing involves risk, including risk of loss.

SPEAKER_2 (0:12)

Fidelity Brokerage Services, LLC.

Eamon Javers (0:13)

Member NYSE, SIPC.

SPEAKER_4 (0:15)

Year after year, Harry and David makes my family's holiday season feel special with treats handcrafted in Medford, Oregon. Harry and David still handpicks and packs every Royal Riviera pair, makes their iconic moose munch popcorn using the original recipe, and ties each bow by hand on their Tower of Treats gifts. And they all taste as good as everyone remembers. Make your own holiday magic and get 20% off site wide at harryanddavid.com promo code pair20. That's harryanddavid.com code pair20.

Carl Quintanilla (0:45)

Market moving insight and analysis. Join Jim Cramer, David Faber and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street. Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Sara Eisen, Mike Santoli, a postman out of the New York Stock Exchange. Faber is going to join us in a moment on this Netflix Warner News. Cramer has the morning off. As for the pre-market, off small today, just about half a percent off the all-time highs. We do have the blockbuster media M&A. Also, our first major inflation print sends the shutdown later this morning. Ten-year yield, just about the biggest weekly gain in six months. Let's begin, though, with the big news of the morning, and that is Netflix agreeing to acquire Warner Bros. Following the separation of Discovery Global, cash and stock transaction has an equity value of $72 billion. This is what Ted Sarandos had to say about it on the conference call.

Ted Sarandos (1:35)

We can't stand still. We need to keep innovating and investing in stories that matter most to audiences. That's what this deal is all about.

The combination of Netflix and Warner Bros. creates a better Netflix for the long term. It sets us up for success for decades to come. Warner Bros. has some of the best entertainment in the world, period.

Carl Quintanilla (1:59)

Faber has been helping the street understand the story all morning long, and he joins us on the phone with more details. David, as Netflix is poised to become one of the, maybe the biggest content creator in the world.

David Faber (2:11)

Yeah, no doubt it's going to be even more of a powerhouse if they get this deal done than they currently are, Carl. You know, stepping back, obviously, it's just stunning when you consider the deal itself and the price being paid at this point for a company whose stock price fired to the news of Paramount's interest was, you know, in the low teens, not even, to be fair. So, an enormous premium being paid and, frankly, quite a multiple as well that Netflix is willing to pay. It's up into the upper 20s, maybe as much as 30 times EBITDA.

You really have to be stunned just at the overall size and scope of the transaction itself. As you said, of course, it's worth $72 billion in equity. $27.75 is the total. Most of that, as I reported yesterday, 85% of it is in cash. The rest in stock that is collared. Let's keep an eye on Netflix shares because they are already edging very close, if not beyond the bottom of that collar, which means you will start to see some value go away, remember, based on that ratio. Not that much, given it's only 15% of the overall consideration to begin with. But when it comes to value, guys, I've got to come back to Paramount. And obviously, as you both know, I've been covering this so closely these last few weeks. Paramount's final bid received last evening was $30 a share all cash. I think Andrew reported this as well a little while ago. And I can confirm. $30 a share all cash for a deal that was for the entire company, as we pointed out so many times. In the case of Netflix, that $27.75 is for the studio and streaming business. Global Networks will be its own entity that will trade separately and may have a value, let's call it, of $3 a share. So you'd say $27.75, let's give it $3. And you know, there's a lot of debate about what Global Networks will be worth. You get to $30.75 versus $30 a share, all cash for the entire company from Paramount, for a deal where the antitrust risk is generally believed to have been lower. And I can add to that some new reporting, which is that after roughly 10 months, if they did not receive antitrust approval, it's my understanding from sources, that Paramount would have started to pay part of the $5 billion reverse break fee to Netflix shareholders. So there's a great amount of frustration, as you might imagine, on the Paramount side at the end of this auction, given that they started the whole thing off, they bid five times and they came up a loser. And obviously on the Netflix side, as we've said many times, wow, they clearly wanted the asset, they clearly were willing to go to the mat to get it. And the question of course becomes, what does it say about the overall company's business, its outlook, what will happen to its multiple? Will it begin to erode in part? And it's even going to be levered. Now it will de-lever quickly, but it will be levered over four times given all the debt they're taking on to pay the huge cash portion of this consideration. So so many things we'll be talking about, by the way, for weeks to come, Carl and Sara.