Warner Bros. Discovery Rejects Paramount Bid as ‘Leveraged Buyout’

Warner Bros. Discovery (WBD) and its vast collection of popular TV series and films, including “Harry Potter,” “Game of Thrones,” and DC Comics titles, are the subject of an ongoing bidding battle between Netflix and Paramount Skydance.

The studio announced on Wednesday that its board had unanimously rejected the Paramount Skydance’s amended $108.4 billion offer, referring to it as a risky “leveraged buyout” that would put the business in debt of a tune of $87 billion.

In a letter to shareholders, WBD advised them to vote in favour of its previous $82.7 billion deal with Netflix for its film and TV studio assets, arguing that the “extraordinary amount” of debt Paramount would need to raise increases the risk of the deal falling through.

WBD went on state that the proposal was dubbed the “largest LBO in history” by WBD’s board, which pointed out that the combined business would have to pay $87 billion in total debt, which is approximately seven times its projected 2026 EBITDA. 

The financing structure of $54 billion in fresh debt and $40 billion in equity, supported by a “irrevocable personal guarantee” from Larry Ellison, a co-founder of Oracle, were the main components of Paramount’s proposal.

In terms of the hidden costs, the board listed approximately $4.7 billion in additional expenses, such as a $1.5 billion debt exchange penalty and a $2.8 billion breakup fee to Netflix, if they terminated their present agreement.

Also in a strategic conflict, WBD objected to Paramount’s “operating restrictions” that would stop it from spinning off its cable assets (CNN, TNT, and Discovery) into a new company named Discovery Global. 

After Warner Bros.’ board opted to sell to Netflix, Paramount, which was rumoured to be in the running to purchase Warner Bros. Discovery (WBD) prior to the announcement of the Netflix transaction, went straight to the WBD’s shareholders with an all-cash, $30-per-share offer in early December. However, WBD turned down Paramount’s offer, referring to it as “illusory” and stating that Paramount had the funds to support its claims. Instead, WBD suggested Netflix’s cash-and-share arrangement.

Then, Paramount returned with a $40 billion guarantee from its CEO David Ellison’s millionaire father, Larry Ellison, who co-founded Oracle, and declared that it would raise $54 billion in debt to finance the transaction.

WBD does not appear to be persuaded. “Paramount, a business with a $14 billion market capitalisation, is pursuing an acquisition that would require $94.65 billion in debt and equity funding, which is over seven times its total market capitalisation. In contrast to the traditional structure of the Netflix merger, this aggressive transaction structure puts WBD and its shareholders at significantly more risk, according to a statement from WBD.

Warner Bros. also questioned Paramount’s capacity to operate effectively should the purchase go through, claiming that increasing such debt would exacerbate Paramount’s existing “junk” credit rating.

Warner Bros. was especially worried that any acquisition would make Paramount’s negative free cash flow worse. Netflix, on the other hand, has an investment grade balance sheet, an A/A3 credit rating, a market capitalisation of almost $400 billion, and a projected free cash flow of more than $12 billion for 2026, according to WBD.

In preference to the Netflix deal the $82.7 billion deal with Netflix, which was inked in December 2025, is still recommended by WBD in which the board claims that the Netflix agreement provides an increased confidence as it is been compared to the Paramount’s “junk” status, Netflix has an investment-grade credit rating. 

And the Benefit to stockholders, WBD stockholders would keep their interest in the Discovery Global spin-off while receiving $27.75 per share (cash and stock). 

WBD’s decision was applauded by Netflix, who stated that the merger will “bring together highly complementary strengths and a shared passion for storytelling.”

The deadline for WBD shareholders to choose whether to submit their shares to Paramount’s hostile offer is January 21, 2026.