Netflix is exploring a shift from its current mixed-stock-and-cash proposal to a fully cash-based acquisition of Warner Bros. Discovery, signaling a strategic pivot in its approach to the $35 billion media consolidation effort. The move could reshape the landscape of streaming and content ownership.
- Netflix is evaluating a shift from a mixed-stock-and-cash offer to a fully cash-based acquisition of Warner Bros. Discovery.
- The proposed deal value remains approximately $35 billion, with the potential need for up to $25 billion in debt financing.
- Netflix’s current cash reserves stand at $12 billion, with $8 billion in available credit lines.
- The change aims to reduce shareholder dilution and potentially expedite regulatory approval.
- The move may impact Netflix’s credit profile and increase interest expenses.
- Warner Bros. Discovery shareholders may favor the liquidity of a cash deal over stock in a weakening content business.
Netflix is evaluating a structural overhaul of its proposed acquisition of Warner Bros. Discovery, with internal discussions focused on replacing the equity component of the offer with a 100% cash transaction. The original bid, valued at approximately $35 billion, had included a blend of Netflix stock and cash, but the company is now assessing the financial and strategic implications of eliminating equity exposure. This change would require Netflix to tap into its balance sheet and potentially issue debt to finance the full purchase price. The potential shift reflects growing concerns about the dilutive impact of issuing new shares, especially as Netflix navigates a challenging subscriber growth environment and increasing scrutiny from investors over capital allocation. A fully cash deal could also improve the appeal to Warner Bros. Discovery shareholders, who may prefer liquidity over stock in a company facing stagnant user growth and content cost pressures. The move comes amid rising speculation that Netflix may be seeking to avoid prolonged regulatory scrutiny, which often intensifies when stock-based transactions are involved. If executed, the all-cash proposition would necessitate Netflix to raise significant capital—potentially up to $25 billion in debt—while maintaining its investment in original content. The company’s current cash reserves stand at approximately $12 billion, with $8 billion in available credit lines, suggesting a substantial financing effort would be required. Wall Street analysts note that the change could impact Netflix’s credit rating and increase interest expenses, though it might also accelerate the deal’s closing timeline. The reevaluation affects not only Netflix and Warner Bros. Discovery but also the broader media and entertainment sector, as the outcome could set a precedent for future M&A activity. Investors in both companies are closely monitoring developments, with Netflix shares trading 3.2% higher following news of the potential shift. The deal’s final structure remains uncertain, pending board approval and regulatory clearance.