Netflix has agreed to buy Warner Bros Discovery's film and streaming business for $72bn (£54bn) in a major Hollywood deal.
After a protracted battle, the streaming giant emerged as the successful bidder for Warner Bros, beating rivals Comcast and Paramount Skydance.
Warner Bros owns franchises such as Harry Potter and Game of Thrones, as well as the streaming service HBO Max.
The takeover is intended to create a new entertainment giant, but the deal must still be approved by antitrust authorities.
Netflix co-CEO Ted Sarandos said the streamer is “very confident” it will receive the necessary regulatory approval and is working “at full speed” toward that end.
He said that by combining Warner Bros.' library of shows and films with the streaming platform's series like Stranger Things, “we can give viewers more of what they love and help define the next age of storytelling.”
“Warner Bros. defined the last century of entertainment, and together we can define the next,” he said.
When asked whether HBO should remain a standalone streaming service, Netflix chief executive Greg Peters said Netflix believes the HBO brand is important to consumers, but added: “We think it's quite early to get into the specifics of how we're going to tailor that offering for consumers.”
Netflix estimates the company will save $2 billion to $3 billion, largely by eliminating duplication in support and technology areas of the business.
According to him, films produced by Warner Bros. will still be shown in theaters, and the Warner Bros. television studio will still be able to produce products for third parties. Netflix will continue to produce content exclusively for its platform.
Calling it a “big day” for the companies, Mr Sarandos acknowledged that the acquisition may have surprised some shareholders, but it was a “rare opportunity” to position Netflix for success “for decades to come”.
David Zaslav, president and CEO of Warner Bros., added that the agreement will bring together “two of the greatest storytelling companies in the world.”
“By teaming up with Netflix, we will ensure that people around the world continue to enjoy the world's most resonant stories for generations to come,” he said.
The cash and stock transaction value is $27.75 per Warner Bros share, and the total enterprise value, including the company's debt and the value of its stock, is about $82.7 billion. The equity value, or cash price, is $72 billion.
Both boards of directors of each company unanimously approved the transaction.
The acquisition of Warner Bros is expected to allow Netflix to expand the studio's production capacity and increase investment in original content.
Netflix will complete the takeover after Warner Bros completes previously announced plans to split its streaming and studio divisions from its global networks division into two companies next year.
Its global networks division will become Discovery Global and will include cable channels such as CNN and TNT Sports in the US, as well as Discovery and free-to-air channels in Europe.
However, TNT Sports International will remain with its streaming and studio division, which will be sold to Netfllix.
Paolo Pescatore, founder and technology media and telecommunications analyst at PP Foresight, said the deal was “a huge statement of intent and underscores Netflix's ambition to become a global leader in the new global streaming order.”
But he warned that while the “surprise move” makes sense for Warner Bros, it could “cause a headache for Netflix” when trying to combine the companies given the size of the deal.
While the deal agreed to is for part of Warner Bros' business, rival Paramount in October launched a bid to buy the entire company, including its cable networks.
Warner Bros rejected the move before putting itself up for sale.
On the eve of the deal announcement, Tom Harrington, head of Enders Analysis's television division, said it was difficult to assess whether the takeover would be approved by regulators, but if it went ahead it would have a huge impact on cinema.
“If this happened, it would reorient Hollywood,” he said.
Mr. Harrington said there would likely be a “big reduction” in the newly merged company's television and film output, leading to resistance to the move from parts of Hollywood and related unions.
On the consumer side, Mr. Harrington said the merger would likely lead to higher prices.
“Netflix will become more expensive, and even though HBO Max will be canceled or become redundant, Netflix's greater penetration into households will likely mean an increase in overall subscription revenues.”
Danny Hewson, head of financial analysis at AJ Bell, said Netflix had “offered an olive branch” to Hollywood by promising it would continue to release Warner Bros films on the big screen.
“If this deal can quickly remove these significant regulatory hurdles, significant cost savings are likely to be realized,” she said.
“How much of these savings will be passed on to subscribers of the streaming platform, or whether Netflix will have too much pricing power, is one area that will face enormous scrutiny in the coming months.”
A spokesman for the Directors Guild of America said ahead of the announcement that the union had “serious concerns” about the merger.
