The merger agreement between Netflix and Warner Bros. for their proposed $82.7 billion deal has key provisions that point to the intense antitrust risk the companies expect to face, embedding unusually expansive regulatory-related clauses and signaling that both sides are bracing for a protracted and highly scrutinized review. The language reflects mounting concern that the deal’s scale and market impact will draw significant attention from competition authorities where clearance is needed — including the US, the UK and other parts of Europe, MLex has learned.
The merger agreement between Netflix and Warner Bros. for their proposed $82.7 billion deal has key provisions that point to the intense antitrust risk the companies expect to face, embedding unusually expansive regulatory-related clauses and signaling that both sides are bracing for a protracted and highly scrutinized review. The language reflects mounting concern that the deal’s scale and market impact will draw significant attention from competition authorities where clearance is needed — including the US, the UK and other parts of Europe, MLex has learned.
The deal arrives with an unusually high degree of antitrust risk already baked in, as early signals from federal regulators, lawmakers, and industry groups point to a lengthy, contentious competition review.
The companies agreed to a $5.8 billion termination fee, representing 7 percent of the deal’s total value — a particularly high percentage for deals that signals high risk of regulatory-driven deal failure.
Break-up fees above 3 to 4 percent are unusual because they may draw Delaware court scrutiny for potentially discouraging competing bids. Fees above 7 percent are almost always reverse termination fees tied to antitrust failure, because regulators, not bidders, are the primary threat.
Termination fee structures above 7 percent of deal value are rare and almost always arise from heightened antitrust exposure or related regulatory failure risk. High termination fees often indicate a high probability that regulators will challenge the merger, or a need to signal buyer commitment despite severe regulatory risk.
Recent cases involving high break-up fees include Google-Wiz (10 percent), which is still pending; Walgreens-RiteAid (7-8 percent), where the deal was restructured; Nvidia-Arm (about 7.5 percent) which was blocked; the attempted deal between Broadcom and Qualcomm (7 percent), which was blocked before a final agreement; Tencent-Huya/DouYu (7 percent) blocked because of SAMR antitrust concerns; Intel-Tower Semiconductor (about 7 percent), terminated because of delays with the antitrust review by SAMR; DraftKings-Entain (about 7-8 percent), which was withdrawn because of UK competition concerns.
The Apollo-Tech Data deal had a 9 percent fee because of financing in addition to regulatory risks, and that deal closed. Vista-Pluralsight had an 8 percent fee because of competitive bid risk in addition to regulatory timeline issues and also closed. The J&J-Omrix deal, which included regulatory manufacturing risk, and LVMH-Tiffany, which was renegotiated, both had fees at around 7 percent and closed.
— Effort undertaking —
The merger agreement also provides for a near “hell-or-high-water” covenant imposed on the buyer — but with an important carveout for burdensome conditions. It governs what the buyer must do to secure regulatory approval and prevent any governmental entity from blocking the transaction.
The buyer must take all the steps necessary to remove any governmental obstacle to closing the deal by the end date. This includes preventing or eliminating: investigations, challenges, or actions by any governmental entity; governmental orders (temporary, preliminary, or permanent) and any other impediment to closing. The combined effect is a very high level of commitment to achieve clearance.
The buyer must take all necessary steps to eliminate regulatory obstacles and offer and implement remedies to avoid blocking orders including: agreeing to divestitures, leases, licenses, or disposals of assets or businesses; holding separate assets pending divestiture; modifying, assigning, or terminating contracts; accepting operational restrictions and other commitments. However, that is only to the extent that these remedies do not constitute a burdensome condition and are conditioned on closing.
Netflix must also litigate — including appeals — against any lawsuits or agency actions seeking to delay or block the transaction. If a governmental order is issued or expected, the company must take all required actions — appeals, bond postings, efforts to vacate, modify, or reverse the order — to allow the transaction to close on time.
Netflix is not required to accept remedies amounting to burdensome conditions and the company is not required to accept any remedy that is not conditioned on closing, or affects any business the companies may have to divest.
Cooperation and information-sharing obligations are extensive, which is typical in high-risk deals where joint strategy is required to navigate complex antitrust issues.
— Timeline —
A closing window of 12 to 18 months is also a signal that the parties expect intense, multi-jurisdictional antitrust scrutiny. In high-concentration markets — especially streaming, media, tech platforms, content production, and data-rich industries — this length of time is associated with deals regulators are likely to investigate deeply, often through full-phase investigations, possible remedies negotiation and possible litigation preparation.
The automatic end-date extensions are also tied to antitrust clearance, extending the end date two times automatically if the antitrust or foreign regulatory conditions have not been satisfied.
This grants regulatory agencies effectively up to about six additional months of leverage and signals the parties expect a prolonged review, multiple jurisdictions may conduct in-depth investigations and clearance is not expected to be routine. Automatic extensions tied specifically to antitrust risk are uncommon except in deals with high expected scrutiny.
Overall, the agreement is drafted on the assumption that antitrust clearance is high-risk, time-consuming, and could require meaningful structural or behavioral remedies, with Netflix bearing the overwhelming share of that risk.
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