Hollywood-level "nuclear explosion" acquisition imminent? Warner Bros. (WBD.US) rumored to be exploring exclusive negotiations with Netflix (NFLX.US)

According to informed sources, Warner Bros. Discovery (WBD.US) has entered into exclusive negotiations to sell its film and television studio as well as HBO Max streaming service to Netflix (NFLX.US). The sources added that if regulators do not approve the deal, Netflix will pay a $5 billion termination fee. If the negotiations do not fall apart, the two companies may announce the deal in the coming days. This news indicates that Netflix is ahead of other bidders such as Paramount Sky (PSKY.US) and Comcast Corporation Class A (CMCSA.US) who are also seeking to acquire some or all of Warner Bros. Discovery's assets. Earlier reports suggested that Netflix had made a cash-heavy acquisition proposal targeting $30 per share. Based on this price, Warner Bros. Discovery is valued at around $74 billion. An informed source revealed that among the many buyers bidding for Warner Bros. Discovery, Netflix had the highest offer. If the deal goes through, Netflix, a leading global streaming service provider, will merge with Warner Bros. Discovery, one of Hollywood's oldest and most respected film studios. This merger will bring about significant changes to the media industry. In addition, Netflix bundling its streaming service with HBO Max will help lower the costs for consumers. Before the acquisition is completed, Warner Bros. Discovery will carry out its pre-established plan to split its cable television channels (including CNN, TBS, and TNT). As audiences move towards streaming, traditional cable TV business is facing significant contraction. Warner Bros. Discovery's cable TV networks revenue declined by 23% in the last quarter due to customer cancellations and advertiser losses. This acquisition marks a dramatic shift in Netflix's strategy, as the company has never engaged in such a large-scale transaction before. Through this deal, Netflix will become the owner of HBO network and its popular show library such as "The Sopranos" and "Big Little Lies." Additionally, Warner Bros. Discovery's assets include its large production studio in California and a wealth of film and TV resources including "Harry Potter" and "Friends." Warner Bros. Discovery's iconic content will provide Netflix with strong programming resources to maintain its leading position against challengers such as Walt Disney Company (DIS.US) and Paramount Sky. However, this deal will undoubtedly face antitrust reviews in the U.S. and Europe, and there have been some warning signs. California Republican Darrell Issa wrote to U.S. regulatory agencies opposing any potential Netflix deal, citing concerns that it may harm consumer interests. Utah Senator Mike Lee (also a Republican) has expressed agreement with Issa's concerns this week. In response, Netflix argued that one of its biggest competitors is YouTube under Alphabet Inc. Class C (GOOGL.US). Analysts Geetha Ranganathan and Raveeno Douglas said, "Netflix may be in the lead in the bidding for Warner Bros. Discovery. The $30 per share offer implies a valuation of $75 billion for Warner Bros. Discovery's assets. While the combined user base of around 450 million will raise significant antitrust concerns, Netflix is attempting to appease regulators by arguing that the deal will lower consumer prices through bundled services." Multiple parties are vying to acquire Warner Bros. Discovery! Though Netflix is currently in the lead, its fairness has been questioned. Like Netflix, Comcast Corporation Class A is also interested in Warner Bros. Discovery's film and streaming assets. According to informed sources, Comcast Corporation Class A's offer includes special clauses allowing Warner Bros. Discovery to split its cable TV networks at any point before the proposed acquisition is completed. Recently, Comcast Corporation Class A President and soon-to-be Co-CEO Mike Cavanagh revealed in an earnings call that acquiring the film studios and streaming assets would complement the company's NBCUniversal. He also stated that the company believes the deal is feasible in the current regulatory environment. Comcast Corporation Class A aims to create a larger entertainment giant by fully integrating Warner Bros. Discovery's assets with NBC television network, the company's film and TV studios, and theme parks. Acquiring Warner Bros. Discovery's HBO Max streaming platform will greatly boost NBC's Peacock streaming service expansion. Some analysts believe that if Peacock under Comcast Corporation Class A is fully integrated with HBO Max, the combined subscription scale and content depth could instantly compete with top global streaming services, directly challenging Netflix and Disney's Disney+. It could even slightly surpass Netflix and Walt Disney Company in terms of market share, streaming technology, popular IP content licensing, and overlapping cost savings of hundreds of millions of dollars annually. Paramount Sky was the first to reach out to Warner Bros. Discovery. Paramount Sky previously made a bid of around $60 billion, but in October it was rejected by Warner Bros. Discovery's board of directors, prompting the formal sale process. Paramount Sky plans to acquire all of Warner Bros. Discovery's assets, with the offer increasing from an initial around $20 per share to $23.5 per share, and the latest proposal being $24 per share, 80% in cash and 20% in stock, which was rejected by Warner Bros. Discovery as undervaluing the company. It is worth mentioning that Paramount Sky has accused Warner Bros. Discovery of unfair practices in the sale process, favoring Netflix over other bidders. The company's legal team expressed concern in a letter to Warner Bros. Discovery's CEO David Zaslav about the "fairness and adequacy" of the bidding process, citing reports that Warner Bros. Discovery management favored Netflix's proposal. The letter revealed that Paramount Sky, led by David Ellison, has requested Warner Bros. Discovery to confirm whether an independent special committee composed of unbiased board members has been established to evaluate the bids and supervise the sale process. Paramount Sky also argued in the letter that its offer was more likely to receive approval from regulatory agencies worldwide.