Last week, Netflix announced a landmark acquisition of key Warner Bros. Discovery (WBD) assets, a transaction that would fundamentally reshape the global entertainment landscape, where it closes.

On an elementary level, here’s how to understand this deal from a transaction and deal-structure perspective, beyond the headlines.

The Purchase Sale Agreement

The parties to the transaction are Warner Bros. Discovery (the Seller) and Netflix (the Buyer). Following a strategic review, the companies executed a definitive Purchase and Sale Agreement for Netflix to acquire WBD’s film/TV studios and streaming business for roughly $72 billion in equity value (approximately $82.7 billion enterprise value). Under the reported terms: Consideration: Shareholders are to receive cash ($23.25) + Netflix stock per WBD share ($4.50). This mix of cash and stock is typical for large strategic M&A, balancing immediate cash value with participation in future upside.The acquired assets will include WBD studio/Streaming assets. The transaction excludes cable/linear TV networks, which will be spun out separately. Break-up fees. Where the deal is terminated under specific circumstances, typically if WBD accepts a superior proposal, WBD will pay a break up fee**.**

The interim period.

Although the purchase agreement is signed, the deal has not yet closed. Signing does not equate to Closing. The estimated 12 to 18-months interim period involves critical steps such as regulatory & antitrust review, where there would be need of approval from the DOJ, FTC, and other international bodies. Regulatory hurdles are a major consideration, as this process is already drawing scrutiny from U.S. and international agencies. Netflix must also arrange necessary debt/financing for the cash portion of the deal. In the meantime while the deal is finalized, WBD must operate in the ordinary course with no major asset sales, layoff, etc without consent.
Closing will occur when consideration has been delivered and assets formally transferred. (IP, contracts, employee, etc.)

The Plot Twist: Paramount-Skydance Hostile Counteroffer

Shortly after Netflix’s deal was announced, Paramount Skydance launched a hostile all-cash tender offer to acquire all of Warner Bros. Discovery for $30 per share, valuing WBD at roughly $108.4 billion, significantly higher than the Netflix deal’s relative valuation. This is after Paramount bid had been rejected by WBD.

Paramount’s bid includes the legacy cable networks that Netflix’s agreement excludes, and it has taken the offer directly to shareholders. This move turns what was initially a negotiated sale into a takeover contest.

We await how this deal unfolds in the coming days.