Emily Flippen

Now, if more than 51% of shareholders choose to sell these shares to Paramount in the next 20 days, Paramount, of course, effectively control Warner Brothers.

As of right now, Netflix and Warner Brothers have reiterated that they're committed to the initial deal despite Paramount's offer.

And the math behind this offer isn't exactly clear.

It's not cut and dry.

What Netflix is offering is a combination of stock and cash and then also the potential value of the cable assets when they've been spun off versus Paramount's flat $30 cash rates.

But I want to ask you, Dan, I mean, why do you think ultimately Warner Brothers decided to go with Netflix bid?

And what, if anything, do you think comes out of this deal?

That's exactly where the difference is between the two bids.

It'll be interesting to see where individual shareholders, the people who own the majority of Warner Brothers shares, ultimately decide because that's a decision that every shareholder needs to make for themselves, whether or not they take the cash or they hold out for the potential change in value of these capable assets.

One thing for me that is very clear from this deal is that

Regardless of whether or not a move forward, Netflix balance sheet is about to look very different than it does today.

Either they are making a massive acquisition and taking on a lot of debt in the process, or they have to pay a breakup fee that would be north of $5 billion, which would eat into their existing cash.

So for Netflix, this is a big change.

Up next, we'll be discussing what this means for consumers and whether or not this move puts Netflix on a smarter path or on a collision course with some of the failed mega mergers of the past.

Welcome back to Motley Fool Money.

We're zooming out at mega mergers and evaluating if Netflix is on the road to repeating history with its pending acquisition of Warner Brothers Discovery.

Now, I know when I think about entertainment mega mergers, my mind does go back to the year 2000, of course, when AOL and Time Warner sought to combine in a deal worth north of $180 billion that was intended to dominate both what they called new and old media business.

But of course, within just a few years, that merger actually led to nearly $100 billion loss, which at the time was the largest corporate loss ever, driven largely by Goodwill write-downs tied to the merger.

Of course, in 2018, AT&T closed its acquisition of Time Warner's assets for $80 billion.

That ultimately had to be unwound less than four years later, in no small part due to financial strain.