Warner Bros Discovery’s board has turned down Paramount Skydance’s latest $108.4 billion bid, describing it as a “risky leveraged buyout” that could saddle the studio with $87 billion in debt.
In a letter to shareholders on Wednesday, the board urged investors to stick with the company’s existing $82.7 billion deal with Netflix, noting that Paramount’s financing was highly uncertain and laden with execution risks.
Paramount’s proposal, backed in part by Oracle co-founder Larry Ellison’s $40 billion personal guarantee and $54 billion in debt, would represent the largest leveraged buyout in Hollywood history.
Warner Bros’ board said the structure “remains inadequate particularly given the insufficient value it would provide, the lack of certainty in PSKY’s ability to complete the offer, and the risks and costs borne by WBD shareholders should PSKY fail to complete the offer.”
Netflix’s competing offer, though smaller in headline value at $27.75 per share in cash and stock, comes with a clear financing plan and investment-grade balance sheet.
Its $400 billion market capitalisation and estimated $12 billion free cash flow for 2026 give Warner Bros confidence that the merger can close smoothly.
Netflix co-CEOs Ted Sarandos and Greg Peters welcomed the board’s decision, saying it recognises their deal “as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry.”
Warner Bros owns some of Hollywood’s most valuable franchises, including Harry Potter, Game of Thrones, Friends, and the DC Comics universe, along with classic films such as Casablanca and Citizen Kane.
Paramount, with a market capitalisation of roughly $14 billion, would have to take on debt far exceeding its current size, and the board says that could affect the studio’s operations and credit rating.
Chairman Samuel Di Piazza told CNBC that while Warner Bros is not currently in talks with Paramount, the company is still open to a better offer. “From our perspective, they’ve got to put something on the table that is compelling,” he said.
Warner Bros has already calculated the costs of breaking its Netflix agreement, estimating nearly $4.7 billion in combined termination fees and financing expenses if it were to abandon that deal.
The board also noted operational risks with a Paramount takeover, including potential restrictions on Warner Bros’ cable network spin-off, Discovery Global, and other moves.
Analysts say Netflix’s simpler financing structure and lower execution risk make it the safer choice, even if Paramount continues to submit revised bids.
Ross Benes, an analyst at Emarketer, noted: “WBD does not want to sell to Paramount, so it will keep rejecting Paramount as long as it is able to. But this process is not over … Paramount will have the opportunity to make further attempts.”
Paramount argues its bid may face fewer regulatory issues, but Warner Bros and its investors are unconvinced that the smaller studio could manage such a massive acquisition without jeopardising its business.
Warner Bros shares slipped slightly in premarket trading following the announcement, while Netflix edged higher and Paramount stayed largely unchanged.
