Why should he lose that money? He signed a contract, and that's legally binding. He will have planned his life and budgeted accordingly to that contract, why should we expect him to accept less money? Would you voluntarily take a 25% paycut in your job if you could keep earning the same amount? Of course not.
This isn't a matter of "doing business on our terms", we are legally obligated to pay him the value of his contract. If another team is willing to pay any proportion of that, then we are monetarily better off. It's likely, due to competition for his signature, that someone will offer us 100%. That works out for us and for him. But if they offer less, we either accept it and save some money, or we keep him and save no money. It seems a pretty simple equation to me.