The battle over Warner Bros. Discovery is far from over, despite Netflix's acquisition announcement.
Entertainment legend Michael Ovitz, co-founder of Creative Artists Agency, once called the film industry “the most cut-throat, competitive, difficult business in the world.” That description seems apt as we watch the intensifying battle between Netflix (NFLX +1.17%) and Paramount Skydance (PSKY 2.69%) to acquire the assets of Warner Bros. Discovery (WBD +1.65%).
After Netflix apparently came out victorious in the recent bidding war, Paramount turned up the heat by launching a hostile takeover bid. The action demonstrates the high stakes involved in this industry consolidation phase of the streaming wars. But where does the ongoing battle leave investors?
Image source: Getty Images.
What's involved in the Netflix deal
Understanding the proposed acquisition's ramifications requires first unraveling the intricacies of Netflix's agreement. Netflix is offering to pay WBD shareholders $23.25 in cash and $4.50 in Netflix stock for each WBD share. This values Warner Bros. Discovery stock at $27.75 per share with an enterprise value of $82.7 billion.
But the devil is in the details. The amount of Netflix stock they will actually receive isn't guaranteed. The agreement includes a collar where WBD shareholders will only receive $4.50 in Netflix shares if the stock's 15-day volume weighted average price falls between $97.91 and $119.67 in the three days before the deal closes. If not, WBD shareholders will get either 0.0460 or 0.0376 Netflix shares for each WBD share, depending on whether Netflix's stock price is below or above the range.
That's not all. The Netflix deal is expected to take between 12 months and 18 months to close. Before then, Warner Bros. Discovery intends to complete its previously announced splitย into two publicly traded businesses. One would be called Warner Bros., and include the film and TV divisions, the HBO brand, and the gaming segment. The other…