Warner Bros. Discovery’s board has again rejected Paramount Skydance’s overture, rejecting the revised $108.4 billion proposal as a leveraged buyout that would saddle the new company with unsustainable levels of debt. In a letter to shareholders, WBD advised investors not to accept the offer and said it continued to back its existing $82.7 billion deal with Netflix for its film and TV studio operations as already announced.
Why WBD Refers to It as a Leveraged Buyout
At the core of WBD’s opposition is the capital structure. The company said the bid led by Paramount would need approximately $87 billion of debt, and described the offer as highly leveraged with minimal committed equity. WBD observed that the deal’s debt-and-equity requirements are nearly seven times greater than Paramount’s market valuation — a skewed proportion that it said is characteristic of classic LBO deals, not strategic mergers.
That math factors into deal certainty. Highly leveraged deals rely on syndicating enormous loan packages as well as high-yield bonds, or tapping private credit markets under favorable terms. WBD cautioned that “the extraordinary borrowing needed” to fuel the bid introduces execution risk and would overstretch the combined company at a financial level just as the streaming business needs sustained investment in content and technology.
Paramount’s Financing Plan Put Under the Microscope
Paramount Skydance first approached WBD shareholders with an all-cash, $30-a-share offer after WBD’s board endorsed the Netflix deal. WBD had described that initial overture as “illusory,” and said the bidder lacked fully credible financing. (Paramount came back with a package that involved a $40 billion equity backstop tied to Larry Ellison and plans to raise $54 billion in debt.)
WBD remains unconvinced. It noted that Paramount has negative free cash flow and below-investment-grade credit ratings, warning that adding tens of billions of dollars more to its already heavy debt load could further strain the balance sheet as well as complicate integration. Credit watchers like S&P Global Ratings and Moody’s have been skeptical of megacapital structures across media, especially when cash generation lags investment needs. In that light, WBD argued, the Paramount test “boils up” financing and credit risk.
Another obstacle is the broader market environment. Jumbo LBO debt has faced tighter bank underwriting and more selective investor appetite in recent years, with private credit coming into the market but sometimes at pricing and covenant terms that can prove to be more expensive than public markets. For a media company grappling with cord-cutting and an increasingly fragmented streaming landscape, the WBD combination symbolized how absorbing such a capital stack could have been a strategic mistake.
Netflix Option Cast as a Lower-Risk Alternative
WBD, on the other hand, framed the Netflix deal as traditional and financeable. It cited Netflix’s market capitalization of about $400 billion, investment-grade balance sheet ratings of A/A3, and free cash flow estimates for 2026 of over $12 billion. For its part, Netflix said a merger would bring together complementary strengths and a shared commitment to premium storytelling.
From WBD’s perspective, the Netflix path is one that provides cleaner closing certainty and sidesteps heavy leverage often used to fund franchises, marketing releases, and supporting platform distribution at the studio. WBD, which has rights to Harry Potter, Game of Thrones, and the DC scripted series library of titles, argued that maintaining financial flexibility is key since intellectual property in those franchises competes against other top properties.
Implications for Hollywood Dealmaking and Strategy
WBD’s position highlights a pivot in media M&A away from debt-ridden takeovers and toward deals that focus on balance-sheet strength. The industry has fresh memories of high-flying tie-ups that created company-debilitating overleverage and forced subsequent restructuring. Regulators have also increased scrutiny of consolidation in the content and distribution businesses, making it far harder to do deals based on both strategic rationale and financial durability.
For Paramount Skydance, the rejection underscores the difficulty of coming in high with a cash offer at this level without investment-grade heft. And with deep-pocketed backers or no, the combination of syndicated loans, high-yield bonds, and private credit required to clear a $50 billion-plus debt raise makes for a formidable adversary — especially in an age when targets are selling off control only to be told by their own shareholders that now they must eat the deal premium’s worth of added financing risk.
What to Watch Next for WBD, Paramount, and Netflix
Investors will be looking to see if Paramount amends terms again with additional equity or committed financing cuts, and if rating agencies provide guidance on how they would view a leveraged structure. Focus will also be directed at WBD’s shareholder vote and regulatory benchmarks for the Netflix deal. In a market where scale, libraries, and direct-to-consumer reach are the hallmarks of winners, the result will help determine the tenor of the next wave of media consolidation.
