Paramount Says Money Is No Object. Warner Bros. Isn’t Convinced.

Larry Ellison is backstopping Paramount’s bid for Warner Brothers, but Warner Brothers is concerned that the billionaire has not provided a personal guarantee to pay.

As Paramount pursued its monthslong quest to acquire Warner Bros. Discovery, it persistently pointed to one ace it had in its pocket: Larry Ellison, the billionaire father to Paramount’s chief executive, David Ellison.

“We are providing you with funds certain from one of the wealthiest families in the world,” Paramount wrote in one of its six letters to Warner Bros. Discovery, according to documents filed with regulators on Monday.

But, behind the scenes, questions over the extent of Mr. Ellison’s financial support were one of the issues that played into Warner Bros.’s decision to go with Netflix, two people familiar with the deliberations said.

Larry Ellison is worth around $273 billion, wealth accumulated through his stake in the software giant Oracle, which now has a market capitalization of nearly $630 billion. But the Warner Bros. Discovery board worried that Mr. Ellison did not personally guarantee the bid under his name and is planning to contribute equity for the deal through a trust with holdings that could be modified at any time.

Warner Bros. Discovery worried it would have limited recourse if Paramount’s bid fell apart, the people said.

Warner Bros. Discovery said last week it would sell much of its business to Netflix for $83 billion, deeming its bid superior to Paramount’s offer to acquire the entire company. In making that assessment, the Warner Bros. Discovery board judged that the Netflix deal was a better value for shareholders and more certain, the people said.

Paramount’s market capitalization is around $15 billion, a fraction of the size of the company it is trying to acquire. It is also constrained by a debt load roughly equal to its equity, and a credit rating a notch below “junk.” That makes the financing from Mr. Ellison and other partners crucial to its bid, which also includes $54 billion in debt.

Netflix is a corporate behemoth worth $420 billion and an investment grade rating. To finance its bid, the streaming giant plans to use more than $10 billion of cash it has on hand, along with some of its stock and loans from a group of banks.

With its bid rejected, Paramount now is expected to pursue a protracted battle to acquire Warner Bros. Discovery and convince its shareholders the board made a mistake. If enough shareholders support Paramount, it would put pressure on the Warner Bros. Discovery board to accept its offer.

The extent to which shareholders share the company’s concerns about Paramount’s financing is likely to impact whether they ultimately side with Netflix over Paramount.

The greater focus for shareholders will very likely be deciding whether selling the company as a whole to Paramount will be more valuable than selling part of the company to Netflix and spinning off the cable business as a stand alone company.

In a letter to shareholders on Wednesday, Paramount outlined its case, and pushed back against any questions over its financing.

“To suggest that we are not ‘good for the money’ (or might commit fraud to try to escape our obligations)” is “absurd,” Paramount said. “That absurdity is underscored by the fact that WBD and its advisers never picked up the phone or typed out a responsive text or email to raise any question or concern or to seek any clarification about either the trust or our equity commitment papers.”

A spokesperson for Warner Bros. Discovery said that “the board and the company have for months run a fair and transparent process with each of the bidders, including extensive opportunities for due diligence and negotiations.”

While there have not been many billionaire-backed takeovers to compare against, Elon Musk’s pursuit of Twitter did include a personal guarantee, said Jim Woolery, a lawyer who has advised on a number of contested situations and the founder of Woolery & Co., an advisory firm.

Shareholders “will put some pressure on Warner to engage — but they’ll also put some pressure on Paramount to put up more evidence of capital,” Mr. Woolery said.

Because Warner Bros. Discovery already rejected Paramount’s bid, it is unlikely to re-engage with the company with the same offer, legal experts said. The terms of the Warner Bros. deal with Netflix prohibit it from soliciting other bids without paying a steep fine. But if Paramount raises its offer, that could change the dynamics. The company has already told Warner Bros. Discovery its latest offer is not its “best and final.”

Shares of Warner Bros. Discovery have risen nearly 14 percent since Paramount started its hostile bid, indicating investors are betting that Paramount will further raise its offer.

According to its offer letters, Paramount said the Lawrence J. Ellison Revocable Trust and the private equity firm RedBird Capital Partners would pay the $40 billion equity check required for the deal while also getting contributions from additional partners.

The offer did not name those additional partners, but according to prior offers made public on Monday, sovereign wealth funds from the Middle East would contribute roughly $24 billion, alongside investment firms including Jared Kushner’s Affinity Partners. If those other partners fall through, the Ellison trust would pay the entire $40 billion.

The board was concerned that the trust was revocable, which means the individual who runs that trust can modify it any time, and it wanted a $2.8 billion limit on the amount of damages it would have to pay if Paramount did not live up to its contractual obligations, the people said.

Paramount, for its part, said in its letter to investors on Wednesday that the Ellison family trust had more than $250 billion of assets, including roughly 1.16 billion shares of Oracle. It noted the trust had been involved in other deals involving public companies.

Paramount has also signed up a number of sophisticated partners to finance the $54 billion in debt needed for the deal, including Bank of America, Citigroup and Apollo Global Management. It is unlikely those partners would have signed up for the deal without sufficient research to make them comfortable with the financing package.

Still, deals financed by billionaires with seemingly limitless resources can go awry. When Mr. Musk unsuccessfully sought to abandon his $44 billion acquisition of Twitter, the fact that he had personally guaranteed the deal made it harder for him to walk away.

Mr. Ellison’s empire is facing some degree of pressure. Shares of Oracle, the source of much of his wealth, closed down nearly 11 percent on Thursday after it delivered earnings that intensified concerns about its bets on artificial intelligence. Shares are still up roughly 20 percent since the start of the year.

Netflix, for its part, faces its own hurdles in pursuing Warner Bros. Discovery. It has already agreed to take on nearly $60 billion in debt to finance its acquisition and may be resistant to add on significantly more debt to counter any higher offers from Paramount. Shares of Netflix are down roughly four percent over the past five days, undermining the value of its cash and stock offer.

“Netflix has been growing tremendously on its own and the price is huge,” Dave Novosel, a senior analyst at Gimme Credit said, expressing concern about the amount of debt Netflix is tacking on to pursue the deal.

Mr. Novosel downgraded his recommendation on Netflix’s debt to underperform.

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