Warner Bros. Discovery (WBD) rejected Paramount Global's revised $108.4 billion acquisition bid, deeming it a "leveraged buyout" that would burden the company with $87 billion in debt, according to a statement released Wednesday. The WBD board unanimously voted against the offer and urged shareholders to do the same in a letter, citing concerns that the substantial debt required by Paramount would increase the risk of the deal's failure.

Instead, WBD recommended shareholders approve its previous $82.7 billion agreement with Netflix for its film and TV studio assets. The company characterized Paramount's offer as "illusory" and questioned Paramount's ability to secure the necessary funding.

Paramount, which had reportedly considered acquiring WBD before the Netflix deal was announced, directly approached WBD shareholders in early December with an all-cash offer of $30 per share after the Warner Bros. board decided to sell to Netflix. This initial bid was also rejected by WBD, which favored Netflix's cash-and-share proposal. Paramount subsequently returned with a $40 billion guarantee from its CEO, David Ellison, in an attempt to bolster its offer.

The ongoing bidding war highlights the intense competition for valuable content libraries in the streaming era. WBD's assets include popular franchises such as Harry Potter, Game of Thrones, and DC Comics titles, making it an attractive target for companies seeking to expand their streaming offerings and gain a competitive edge. The acquisition of such a vast content library could significantly enhance a company's ability to train and refine AI models used for content recommendation, personalized viewing experiences, and even automated script generation.

The "leveraged buyout" label applied by WBD suggests concerns about Paramount's financing strategy. A leveraged buyout involves acquiring a company using a significant amount of borrowed money, often secured by the acquired company's assets. While this can allow for larger acquisitions, it also increases the financial risk for the acquiring company, as it must generate sufficient cash flow to service the debt.

The rejection of Paramount's bid underscores WBD's confidence in its existing agreement with Netflix. The deal with Netflix would provide WBD with a substantial cash infusion and allow it to focus on its core business. The outcome of the shareholder vote on the Netflix deal will likely determine the next steps in the ongoing saga.