Warner Bros. Discovery rejects Paramount’s bid again, calls it a ‘leveraged buyout’

The competitive landscape surrounding Warner Bros. Discovery (WBD) is heating up as the studio firmly rejected Paramount Skydance’s revised bid of $108.4 billion. In a statement released on Wednesday, WBD's board expressed unanimous disapproval, labeling the offer a "leveraged buyout" that would burden the company with an overwhelming $87 billion in debt. In a letter directed to shareholders, WBD emphasized the significant risks associated with Paramount's proposal. They argued that the hefty debt required could jeopardize the transaction's viability. Instead, they encouraged shareholders to support an earlier $82.7 billion agreement with Netflix for its film and TV studio assets. This bidding saga escalated when Paramount, which had previously shown interest in acquiring WBD, approached WBD’s shareholders directly with a cash offer of $30 per share shortly after WBD decided to sell to Netflix. However, WBD dismissed this initial bid as "illusory," questioning Paramount's financial backing and advising shareholders to favor Netflix’s cash-and-stock proposal. In response, Paramount attempted to bolster its offer by securing a $40 billion guarantee from David Ellison's father, Larry Ellison, co-founder of Oracle, and proposed raising an additional $54 billion in debt to facilitate the acquisition. Nevertheless, WBD remained unconvinced, highlighting the disparity between Paramount's market capitalization of $14 billion and the proposed $94.65 billion financing. WBD further articulated that such a high-risk financial structure posed significant threats to WBD and its investors compared to the more stable Netflix merger. They expressed concerns regarding Paramount's capability to manage the acquisition, particularly given its current "junk" credit rating and negative free cash flow, which would likely worsen following the deal. In stark contrast, WBD pointed out Netflix's robust financial health, noting its market capitalization of approximately $400 billion, an investment-grade balance sheet, and an impressive projected free cash flow of over $12 billion by 2026. Following WBD's decision, Netflix welcomed the outcome, stating that the merger would unite complementary strengths and a mutual dedication to storytelling.