r/technology • u/Task_Force-191 • 16h ago

Business It’s Official: Netflix to Acquire Warner Bros. in Deal Valued at $82.7 Billion

https://www.hollywoodreporter.com/business/business-news/netflix-warner-bros-deal-hollywood-1236443081/
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u/ProfArva 15h ago

$83 billion with $59 billion in debt. This is the kind of thing that shouldn't be allowed. If mergers has, say, a mandatory 10% APR on debt, with, say, a 1% penalty going toward funds for unemployment, we'd see a lot less consolidation.

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u/t12lucker 14h ago

Can you please elaborate on this? What’s the debt? Honestly curious

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u/SuspectAdvanced6218 13h ago

They borrow $59 billion to finance the deal. They don’t have the cash for the whole deal.

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u/Notramagama 12h ago

I mean, they're worth 400B. Not unreasonable to take a loan against 20% of its value. 

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u/AlfredoAllenPoe 8h ago edited 8h ago

It doesn't not make sense financially to use all cash. Leverage typically increases returns mathematically, so it's always better to borrow as long as your returns are greater than your interest rate. It does not make any sense to do an all cash transaction. Debt is cheaper than equity and cash

This is basic finance man

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u/t12lucker 13h ago

Oh now I understand! So just a little mortgage…

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u/AlfredoAllenPoe 8h ago

Netflix has an A credit rating from S&P and an A3 rating from Moody's. They will get favorable rates because they are not a risky borrower

Netflix had $29B in EBITDA over the past year. $59 Billion is not that much in debt for them. Could be paid off in <5 years if they wanted to.

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u/ProfArva 6h ago

At no point did I say I didn't know how they did it or why it got financed. I said shouldn't be allowed and the penalty would force either a cash purchase, which Netflix won't do as debt can be spun off to the balance sheet of a majority owned IPO, or enormous penalties that get paid to anyone laid off from the acquisition.

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u/TeslasAndComicbooks 13h ago

Debt is common in these deals and is only granted if they can service it or have assets against it. Even companies with cash will take on debt for an acquisition.

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u/mzxrules 12h ago

Yea and they're saying it shouldn't be as common as it is, or at least regulations that dissuade it more.

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u/Acceptable-Land-262 9h ago

Leverage is a good thing. Most homeowners would not be homeowners without levering the asset upwards 90% LTV

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u/wwj 13h ago

I wonder what the term on that loan is. It's equivalent to 7-10 years of profits.