Netflix has agreed to buy the film and streaming businesses of Warner Bros Discovery for $72bn (£54bn) in a major Hollywood deal.
The streaming giant emerged as the top bidder for Warner Bros ahead of rivals Comcast and Paramount Skydance after a drawn-out battle.
Warner Bros owns franchises including Harry Potter and Game of Thrones, and the streaming service HBO Max.
The takeover is set to lead to a radical reshaping of the US film and media industry, but analysts have warned that the final deal is still subject to approval from competition authorities.
Netflix co-chief executive Ted Sarandos said the streamer was “highly confident” it would receive the regulatory approval it needs and that it was running “full speed” towards this.
He said that by combining the library of Warner Bros shows and movies with the streaming platform’s series such as Stranger Things, “we can give audiences more of what they love and help define the next century of storytelling”.
“Warner Bros has defined the last century of entertainment, and together we can define the next one,” he said.
Asked whether HBO should remain a separate streaming service, co-chief executive Greg Peters said Netflix believed the HBO brand was important for consumers, but added: “We think it’s quite early to get into the specifics of how we’re going to tailor this offering for consumers.”
Netflix estimates it will find $2-3bn in savings, mostly through eliminating overlaps in the support and technology areas of the businesses.
Films made by Warner Bros will continue to be launched in cinemas, it said, and Warner Bros television studio will continue to be able to produce for third parties.
Netflix will keep producing content exclusively for its own platform.
Labelling it a “big day” for the companies, Sarandos acknowledged the acquisition may have surprised some shareholders, but it was a “rare opportunity” to set Netflix up for success for decades to come”.
David Zaslav, president and chief executive of Warner Bros, added that the agreement would combine “two of the greatest storytelling companies in the world”.
“By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come,” he said.
The cash and stock deal is worth $27.75 per Warner Bros share, with a total enterprise value – which includes the company’s debts and the value of its shares -of about $82.7bn.
The equity value, or cash price, is $72bn.
Both boards of directors from each company unanimously approved the deal.
The acquisition of Warner Bros is expected to enable Netflix to expand its studio production capacity and increase its investment in original content.
Netflix will complete the takeover after Warner Bros finalises its previously announced plans to separate its streaming and studios division from its global networks division into two publicly traded companies next year.
Its global networks division includes its cable channels, such as CNN, as well as its sports brands and free-to-air channels in Europe.
‘Global mega power’
Paolo Pescatore, founder and technology media and telecom analyst at PP Foresight, said the sale was “a huge statement of intent and underlines Netflix’s aspirations to be a global leader in the new world order of streaming”.
But he warned that while the “surprising move” made sense for Warner Bros, it could “provide a headache for Netflix” when trying to combine the companies, given the size of the deal.
While the agreed deal is for part of the Warner Bros business, rival Paramount had tabled a bid to buy the whole company, including its cable networks, in October.
Warner Bros rejected this move before putting itself up for sale.
Ahead of Friday’s announcement, Emma Wall, chief investment strategist at Hargreaves Lansdown, said the US competition regulator was likely to get involved given the size of the new company.
“This will create a global mega power in broadcast entertainment, which the regulator will want to look at,” she said.
Tom Harrington, head of television at Enders Analysis, said it was hard to gauge whether the deal would be approved by regulators, but if it went through,h it would have a massive impact on cinema.
“Were it to go through, it would reorient Hollywood,” he said.
“Netflix has always had some limited use for the cinema, but generally its offering undermines it.”
Mr Harrington said there was likely to be “big reductions” in television and film output from a newly-merged company, which would lead to resistance to the move from parts of Hollywood and relevant unions.
For consumers, Harrington said a merger was likely to lead to higher prices.
“Netflix would get more expensive, and even though HBO Max would be shuttered/become non-essential, the greater penetration of Netflix households would likely mean an increase in total overall subscription revenues.”
