Leave it to the entertainment stocks to turn even a garden-variety acquisition into marquee-worthy content. Netflix (NFLX +2.35%) seemed to have a deal in place -- late last week -- to acquire Warner Bros. Discovery (WBD -0.38%) valued at $82.7 billion in cash, stock, and assumed debt.
This week finds Paramount Skydance crashing the party with a hostile bid of $108 billion for Warner Bros. Discovery. It's more money and likely fewer regulatory hurdles to clear, but problematic investors and a stiff breakup fee make this a buyout battle worth watching.
Bloomberg is reporting this week that Netflix was considering other acquisition targets, including Electronic Arts to beef up its nascent gaming offerings and Disney (DIS +1.20%). Can Netflix turn to one of these companies as a backup plan if Paramount Skydance is able to wrestle Warner Bros. Discovery out of its hands? EA is no longer in the game, as it agreed to be purchased three months ago. Disney is an intriguing and attractive choice, but -- spoiler alert -- that deal isn't likely to happen.
Image source: Disney.
When you wish upon a star
Before we delve into how perfectly Disney assets would flesh out the bold ambitions of Netflix, let's discuss how prohibitive the cost of a Disney stock deal would be. Warner Bros. Discovery stock has seen its shares more than double this year -- up 160% -- as the bidding war plays out. In stark contrast, Disney stock is trading slightly lower in 2025.
Disney has a market cap of $192 billion, and an enterprise value of $237 billion. This doesn't mean that a potential buyer wouldn't have to pay twice or thrice as much for Disney as they would for an asset-rich but prospects-poor Warner Bros. Discovery. The tab would be much higher.
Warner Bros. Discovery began this year with a market cap of $26 billion, and you see where the bidding war stands 11 months later. You can argue that Warner Bros. Discovery stock was depressed due to revenue declining for the second consecutive year, but that's also why it was available. Disney stock has been a market laggard in recent years, but it's not actively seeking a suitor on bended knee.
Someone would have to make a serious offer with a healthy premium for Disney's board to even take it seriously. Remember when Comcast made a hostile bid to buy Disney for $66 billion 21 years ago? Disney didn't give it a second thought, and the company is far more complete these days with four major content-widening acquisitions along the way.
Netflix would have to offer at least $300 billion, if not $400 billion, to give the House of Mouse enough cheese to take to the boardroom. At that point -- with Netflix and its $440 billion market cap -- it almost becomes a merger of equals. Netflix doesn't want that, and Disney's not asking for any attention.
NASDAQ: NFLX
Key Data Points
There's a great big beautiful tomorrow
A deal isn't going to happen, but what would it have looked like? Beyond potentially catapulting Netflix to an enterprise value north of $1 trillion, the combined company would have made it a juggernaut. Let's compare what Netflix is getting with the deal it has in place relative to what Disney owns.
Netflix now has the contractual keys to the rich content of Warner Bros. Discovery intellectual property, including DC Comics, Game of Thrones, and Harry Potter. It would replace that in a heartbeat to have Marvel, Lucasfilm, Pixar, and Disney's homegrown IP.
On the streaming front, Disney didn't launch Disney+ until 2019, but its premium streaming audience is already larger than Warner's HBO. Warner Bros. Discovery has some assets, including CNN and some cable networks, that Netflix would unload to recoup some of the deal costs. One can imagine that it would do the same with ABC and some of Disney's other linear networks outside of ESPN.
Let's dream bigger. Disney already operates the world's most popular theme parks. Netflix is just starting to dip its toes into the realm of gated attractions with the modest Netflix House it just opened in Philadelphia. Disney owns the country's fastest-growing fleet of cruise ships, offering a premium and differentiated experience in that market. Netflix would probably never open its own theme park or buy a cruise ship, but Disney is the cheat code to enter those two consumer-facing markets in a position of leadership.
Would Disney look good on Netflix's arm? Absolutely. Is it going to happen? Of course not.
