Warner Bros Discovery has once again rejected Paramount Skydance’s takeover bid, even after Paramount tried to improve its offer. The board’s message to shareholders was clear and unanimous, the deal still carries too much risk and does not beat the certainty of Warner’s existing agreement with Netflix.
A deal built on borrowed money
Warner Bros’ biggest worry is how Paramount plans to pay for the acquisition. The company says the offer is effectively a leveraged buyout, meaning Paramount would borrow an extraordinary amount of money to fund the deal. According to Warner, Paramount would need to raise more than $50 billion in new debt, on top of absorbing Warner Bros’ own existing borrowings. That would create a combined company carrying about $87 billion in debt, making it the largest leveraged buyout ever attempted.
“This aggressive transaction structure poses materially more risk for WBD and its shareholders,” the board said in its statement. Warner fears that if markets turn, lenders hesitate, or business conditions weaken, the financing could collapse at the last minute, leaving the company stuck.
Why Netflix feels a better choice for the board?
In contrast, Warner says its deal with Netflix is far more stable. Netflix is a much larger company with a strong balance sheet, steady cash flow and an investment-grade credit rating. It does not need to rely on heavy borrowing or multiple lenders to close the deal.
“Your Board negotiated a merger with Netflix that maximizes value while mitigating downside risks,” Warner told shareholders. The board believes Netflix’s size and financial strength significantly reduce the chances of the deal failing after months of uncertainty.
The cost of a failed Paramount deal
One of the most damaging scenarios Warner outlined is what happens if it walks away from Netflix and then the Paramount deal falls through.
In that case, Warner would still owe Netflix a $2.8 billion breakup fee, pay another $1.5 billion tied to failed debt transactions, and face hundreds of millions of dollars in higher interest costs. Even though Paramount has promised a $5.8 billion termination fee, Warner calculates that the net benefit would shrink to just $1.1 billion.
That amount, the board said, “would not come close to helping WBD address the likely damage to our businesses.” Netflix deal, by comparison, does not expose Warner to these additional penalties.
Warner acknowledged that Paramount did make some changes in its revised offer. These included a personal financial guarantee from billionaire Larry Ellison, changes to the equity financing structure, and a higher termination fee if the deal fails.
But the board said the most serious flaws remain. Paramount still refuses to cover the Netflix breakup fee, continues to impose strict operating restrictions on Warner, and has not improved the price or declared the offer final.
“PSKY has continued to submit offers that still include many of the deficiencies we previously repeatedly identified,” the board said.
A deal that freezes Warner’s business
Another major concern is how Paramount’s offer would limit Warner’s ability to run its own business while waiting for the deal to close, a process that could take 12 to 18 months. During that time, Warner would be restricted from refinancing debt, completing a planned spinoff of Discovery Global, or making strategic changes. If the deal eventually failed, Warner would emerge weakened after more than a year of lost flexibility. “If the PSKY offer fails to close, WBD shareholders would be left with shares in a business that has been restricted from pursuing its key initiatives,” the board warned.
Regulatory risk is not the deciding factor
Paramount has argued that its deal would be easier to clear regulators than a Netflix merger. Warner disagrees. The board said it sees no meaningful difference in regulatory risk between the two deals, noting that both would require approvals in multiple countries. “There is no material difference in the level of regulatory risk,” Warner said. In other words, regulatory uncertainty exists either way, so it is not a reason to choose a riskier deal.
Trust issues and legal threats
Warner also raised concerns about Paramount’s conduct during negotiations. It accused Paramount of breaching confidentiality agreements, making repeated litigation threats, and behaving like a combative counterparty. “PSKY’s credibility is undermined by breaches of its contractual obligations and spurious, multiple threats of litigation,” Warner said. This history, the board believes, increases the chances of disputes or collapse before closing.
Too small for such a big gamble
Warner pointed to the sheer scale mismatch. Paramount is a company with a market value of about $14 billion, yet it is attempting an acquisition requiring nearly $95 billion in financing. “PSKY is a company with a $14 billion market capitalisation attempting an acquisition requiring $94.65 billion of debt and equity financing,” Warner said. To Warner’s board, that imbalance alone makes the offer unsafe.