Warner Bros. Discovery has rejected a revised takeover proposal from Paramount Skydance, extending a high-profile bidding contest for the media company and its film and television library, and reaffirmed its support for a previously announced transaction with Netflix.
The company said on Wednesday that its board had unanimously turned down Paramount Skydance’s $108.4 billion offer, describing it as a leveraged buyout that would leave Warner Bros. Discovery carrying $87 billion in debt.
Board Cites Financing And Execution Risks
In a letter to shareholders, Warner Bros. Discovery said the scale of borrowing required to complete the Paramount proposal significantly increased the risk that the deal would fail. The company urged shareholders to vote against the offer and instead support its earlier $82.7 billion agreement with Netflix for its film and television studio assets.
Warner Bros. Discovery said the debt burden associated with the Paramount bid could create instability and uncertainty, making the transaction less attractive than the Netflix deal, which combines cash and shares.
Paramount Appeal Directly To Shareholders
Paramount Skydance went directly to Warner Bros. Discovery shareholders in early December with an all-cash offer valued at $30 per share, after Warner Bros. Discovery’s board had agreed to sell to Netflix.
At the time, Warner Bros. Discovery rejected the bid, calling it illusory and questioning whether Paramount had the financial capacity to complete the acquisition. The board continued to recommend the Netflix transaction.
Paramount later revised its proposal, securing a $40 billion guarantee from David Ellison’s father, Larry Ellison, and outlining plans to raise $54 billion in debt to finance the purchase.
Concerns Over Paramount Financial Position
Warner Bros. Discovery said the revised proposal did not resolve its concerns. In a statement, the company said Paramount, with a market capitalization of about $14 billion, was attempting an acquisition requiring nearly $94.65 billion in combined debt and equity financing.
The company said that structure posed significantly more risk for shareholders than the Netflix transaction. It also raised doubts about Paramount’s ability to operate effectively after the acquisition, citing the impact that additional borrowing could have on its existing junk credit rating.
Warner Bros. Discovery highlighted Paramount’s negative free cash flow, saying an acquisition of this scale would likely worsen its financial position.
Comparison With Netflix Offer
In contrast, Warner Bros. Discovery pointed to Netflix’s financial strength. It said Netflix has a market capitalization of about $400 billion, an investment grade balance sheet, an A and A3 credit rating, and estimated free cash flow exceeding $12 billion in 2026.
Netflix welcomed the board’s decision, saying the merger would bring together complementary capabilities and a shared focus on producing film and television content.
Featured image credits: Wikimedia Commons
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