‘Lowest-probability outcome’: Netflix’s $72 billion deal for Warner Bros. Discovery stuns Wall Street

Netflix’s (NFLX) $72 billion agreement to acquire Warner Bros.’ (WBD) studio and streaming assets has set off a high-stakes debate about whether regulators will allow the world’s largest streamer to get even bigger.

Netflix

The deal, which folds Warner Bros.’ film and TV studios, HBO, and HBO Max into Netflix’s global machine, immediately resets the competitive landscape. And it caught even seasoned Wall Street analysts off guard.

Citi analyst Jason Bazinet admitted this scenario barely made his list of possibilities.

5%

“It was my lowest-probability outcome,” he told Yahoo Finance on Friday. “Actually, we only had a 5% likelihood that this transaction would be consummated.”

His framework assumed consolidation among the three subscale streaming apps — HBO Max, Paramount+ (PSKY), and Peacock (CMCSA) — rather than the category leader using its balance sheet to absorb a major rival.

The Industry Leader

“We just put very low probability on the industry leader essentially getting bigger,” he said. “But that’s what this transaction says.”

About E. J. McKay

E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.