Big Law gears up for antitrust test on Netflix's $72bn Warner Bros deal

Netflix’s $72 billion move to acquire Warner Bros Discovery has handed a trio of elite US firms one of the most high-stakes mandates of the year, and set up what is expected to be intense regulatory scrutiny in Washington, Brussels and London.

Skadden is advising Netflix, while WBD has turned to Wachtell and Debevoise. The deal would combine two of the most powerful players in global streaming, giving Netflix ownership of shows including The Sopranos, Game of Thrones and Succession. WBD shareholders will receive cash and Netflix shares, valuing the business at $82.7 billion including debt.

Before completion, WBD will spin off CNN, TNT and its other cable networks into a separate listed company, leaving the studio, HBO and the streaming assets to be sold to Netflix.

Competition issues

The proposed tie-up immediately raises major competition questions. Netflix is already the world’s biggest streamer, while HBO Max and Discovery+ combined are the third or fourth largest, depending on which ranking you look at.

A merger would give Netflix sweeping influence over premium content and distribution, precisely the kind of consolidation that regulators in the US, EU and UK will be looking very closely at.

Political figures in both Washington and Westminster have already voiced concerns. Rival streaming giant Paramount has also begun trying to disrupt the sale, instructing Quinn Emanuel to challenge what it calls an "unfair and tilted" process, in a letter seen by CNBC.

Netflix is expected to argue that there is significant subscriber overlap, according to Bloomberg. It will say that more than 75% of HBO Max users are already Netflix customers positioning the deal as complementary rather than anti-competitive.

The regulatory risk is reflected in the price: Netflix has agreed to pay a $5.8 billion break fee if the deal collapses or fails to win approval. The fee is one of the biggest ever.

A heavyweight legal line-up

Skadden’s team includes Palo Alto M&A partners Kenton King and Sonia Nijjar, New York partner Lauren Kramer and Washington antitrust partners Steve Sunshine and Joseph Rancour.

Debevoise’s team is led by New York M&A partners Jonathan Levitsky, Gordon Moodie, Katherine Durnan Taylor and Erik Andrén. Moodie, notably, joined Debevoise last year after a stint as chief product officer at legal AI company Harvey.

Wachtell’s team is led by corporate partners Andrew Nussbaum and Karessa Cain. Both Wachtell and Debvoise were involved in the 2021 merger and spin-off that created WBD in 2021.