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The largest proposed debt load in M&A history collapsed over leverage ratios above 8.0x, repricing the ceiling for cross-vertical entertainment roll-ups.
$108 billion
leveraged buyout proposal from an unnamed acquirer widely reported…
$87 billion
in proposed debt financing—a leverage multiple above
8.0x
trailing EBITDA and the largest absolute debt load ever…
$21 billion
equity check represented just 19% of the total enterprise…
Warner Bros. Discovery has turned down a $108 billion leveraged buyout proposal from an unnamed acquirer widely reported to be Electronic Arts or an EA-backed consortium. The deal collapsed over $87 billion in proposed debt financing—a leverage multiple above 8.0x trailing EBITDA and the largest absolute debt load ever contemplated in a media or gaming acquisition.
The bid surfaced in private discussions during the second week of May. Warner's board reviewed the structure for six days before issuing a formal rejection on May 19. The $21 billion equity check represented just 19% of the total enterprise value, a ratio that would have left Warner's combined gaming, studio, and streaming assets servicing interest expense equal to roughly $6.2 billion annually at current corporate borrowing rates. Warner's existing debt stack sits at $42 billion, meaning the transaction would have more than doubled the company's obligations while adding minimal operational synergy in the near term.
The rejection matters because it exposes the ceiling on leverage tolerance in cross-vertical entertainment roll-ups. EA's fiscal 2024 revenue was $7.4 billion with EBITDA near $2.1 billion. Warner's FY2023 EBITDA was approximately $10.8 billion. Even assuming full revenue retention and no integration drag, the combined entity would have faced a leverage ratio above 6.5x pro forma EBITDA—a level unseen in investment-grade media since the leveraged cable acquisitions of 2006. Bond markets have already repriced EA's 2031 notes down 4.2 points in the past week, reflecting concern that even a rejected bid signals management appetite for balance-sheet risk that credit committees will not underwrite.
The structure also reveals a broader shift in gaming M&A. Where Microsoft's $69 billion Activision acquisition carried $13 billion in new debt and leaned on $56 billion in cash and equity, EA's reported approach inverted the formula. That inversion reflects tighter equity markets and a belief among some strategics that streaming and IP assets justify higher leverage multiples than traditional software businesses. Warner's rejection suggests the market has not yet repriced entertainment assets to absorb that assumption. Allocators should note that Warner's shares fell 6.8% in after-hours trading on May 19, erasing $4.1 billion in market capitalization despite the deal's collapse—a signal that investors had begun pricing in a takeout premium before the formal announcement.
Watch for three follow-on events. First, EA's Q1 fiscal 2025 earnings call on May 30, where management will face questions on capital allocation and whether other bids are in motion. Second, any credit rating commentary from Moody's or Fitch in the next 15 days; EA currently holds a Baa2 rating, and a formal review could pressure the stock further. Third, whether Warner announces a strategic review or asset sale in the next 90 days to address the $42 billion existing debt load, which now trades at spreads 140 basis points wider than comparable media credits.
The $87 billion debt figure is not a negotiating position. It is the number at which the bond market draws a line.
Branded by POPS4 · proof in 60 seconds
For the principal
Monitor EA's capital allocation posture on the May 30 earnings call; a second bid attempt signals management risk override.
For the operator
Watch Warner's bond spreads through June 15; widening beyond 150bps suggests forced asset sales that reprice streaming multiples downward.
For the house
Short EA 2031s, long Warner equity into Q2 earnings; rejected bids historically compress targets 8-12% before mean reversion.
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