‘Largest LBO in history’: Warner rejects Paramount again, scoffing at $87 billion worth of debt in its $108 billion bid

Warner Bros. Discovery’s Board of Directors has again unanimously recommended that WBD stockholders reject the revised offer from Paramount Skydance (PSKY) announced December 22, 2025, and continues to recommend that stockholders approve the deal with Netflix, which said it welcomed Warner’s latest reaffirmation of their binding deal.

“The Board unanimously determined that the Paramount’s latest offer remains inferior to our merger agreement with Netflix across multiple key areas,” said Samuel A. Di Piazza, Jr., Chair of the Warner Bros. Discovery Board of Directors. “Paramount’s offer continues to provide insufficient value, including terms such as an extraordinary amount of debt financing that create risks to close and lack of protections for our shareholders if a transaction is not completed.”

Since Netflix stunned Hollywood in early December by emerging as the winning bidder in the Warner auction, Paramount has put up a bitter fight, yet neither party has raised the value of its offer yet. Under the terms announced December 5, Netflix will acquire Warner Bros., including its film and television studios, HBO Max and HBO, in a cash-and-stock transaction valued at $27.75 per WBD share (total enterprise value of approximately $82.7 billion; equity value of $72 billion). The transaction preserves WBD’s planned separation of Discovery Global, expected in the third quarter of 2026. 

The Paramount bid is worth an enterprise value of around $108 billion for all of WBD, including Discovery global, and an equity value of about $74.35 billion. The big change to Paramount’s offer on December 22 regarded the personal guarantee of Larry Ellison, father of Paramount owner David Ellison, as the WBD board had objected to the previous offer being guaranteed by a trust. Paramount’s bid also lost the backing of Jared Kushner, President Trump’s son-in-law, halfway through December, although it still features a consortium of Middle Eastern investors, which the WBD board reportedly views as riskier than Netflix’s offer.

The WBD letter to shareholders did not mention the Middle Eastern aspect in particular, but stressed the fact that Paramount would be a relative minnow swallowing a whale in this transaction.

“The extraordinary amount of debt financing, as well as other terms of the PSKY offer, heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” the letter said. “PSKY is a company with a $14 billion market capitalization attempting an acquisition requiring $94.65 billion of debt and equity financing, nearly seven times its total market capitalization. To effect the transaction, it intends to incur an extraordinary amount of incremental debt – more than $50 billion – through arrangements with multiple financing partners.” The WBD board also noted that this deal would be the largest leveraged buyout in history, with $87 billion of total pro forma gross debt and an estimated gross leverage of approximately 7x 2026E EBITDA before synergies.

Netflix has submitted its Hart-Scott-Rodino antitrust filing with U.S. competition authorities and is engaging with regulators, both domestically and in the EU. The financing structure is not subject to CFIUS review. Closing remains expected 12–18 months from signing, subject to regulatory and stockholder approvals. 

“The WBD Board remains fully supportive of and continues to recommend Netflix’s merger agreement, recognizing it as the superior proposal that will deliver the greatest value to its stockholders, as well as consumers, creators and the broader entertainment industry,” said Ted Sarandos and Greg Peters, co-CEOs of Netflix. “Netflix and Warner Bros. will bring together highly complementary strengths and a shared passion for storytelling. By joining forces, we will offer audiences even more of the series and films they love—at home and in theaters—expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry.”

The WBD board also said it considered the costs and loss of value for WBD shareholders associated with accepting the PSKY offer, highlighting that it would be obligated to pay Netflix a $2.8 billion termination fee for abandoning its existing merger agreement; incur a $1.5 billion fee for failing to complete our debt exchange, which we could not execute under the PSKY offer without PSKY’s consent; and incur incremental interest expense of approximately $350 million. The total cost to WBD would be approximately $4.7 billion, or $1.79 per share. If Paramount were to return with a higher offer, say $5 billion or so, these concerns would be mitigated, but that hasn’t happened yet.

Editor’s note: the author worked for Netflix from June 2024 through July 2025.

This story was originally featured on Fortune.com