Paramount Skydance is upping the ante in its battle for Warner Bros. Discovery.
In a letter to Warner Bros. shareholders Monday, Paramount CEO David Ellison announced his company had filed a lawsuit against Warner Bros. in Delaware Chancery Court — Paramount’s latest move in its ongoing attempts to make a hostile takeover of the entertainment company.
The lawsuit calls on the court to force Warner Bros. to disclose clear financial information about the Netflix deal, particularly why Warner Bros. favors Netflix’s offer over Paramount’s all-cash tender bid, which Ellison considers a lower-risk, higher value, “superior offer.”
“We are surprised by the lack of transparency on WBD’s part regarding basic financial matters,” Ellison said in the Monday letter.
“It just doesn’t add up,” he added. “WBD has provided increasingly novel reasons for avoiding a transaction with Paramount, but what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer.”
During the next Warner Bros. shareholder meeting, Ellison said Paramount will launch a proxy fight and nominate a new slate of directors — which shareholders could vote on — who, if elected, would engage with Paramount’s offer, unlike the current board.
If Warner Bros. holds a special meeting to vote on the Netflix deal, Ellison says Paramount will urge shareholders to vote against the deal.
Paramount also plans to propose an amendment to Warner Bros.’ bylaws, which would require the company to receive shareholder approval before breaking off from its cable networks, a move it plans to make under the Netflix agreement.
Warner Bros. called Paramount’s suit “meritless” in a statement Monday.
“Despite six weeks and just as many press releases from Paramount Skydance, it has yet to raise the price or address the numerous and obvious deficiencies of its offer,” Warner Bros. shared, per Variety.
“Instead, Paramount Skydance is seeking to distract with a meritless lawsuit and attacks on a board that has delivered an unprecedented amount of shareholder value. In spite of its multiple opportunities, Paramount Skydance continues to propose a transaction that our board unanimously concluded is not superior to the merger agreement with Netflix.”
The suit follows Paramount’s latest rejection from Warner Bros. in a monthslong battle against Netflix to acquire the entertainment company.
Netflix announced in December a $82.7 billion deal to acquire much of Warner Bros.’ business.
Days later, Paramount launched a hostile all-cash tender bid to acquire Warner Bros., offering shareholders $30 per share, a bid valued at $108 billion. Warner Bros. has rejected Paramount’s offer eight times — even when revised.
Still, Paramount insists its $30 per share tender offer is the “superior” bid
“Our offer clearly provides WBD investors greater value and a more certain, expedited path to completion,” Ellison said in a previous statement shared Thursday. “Throughout this process, we have worked hard for WBD shareholders and remain committed to engaging with them on the merits of our superior bid and advancing our ongoing regulatory review process.”
In the ongoing bidding war, Netflix and Paramount are asking for different things. Netflix’s proposal seeks to acquire Warner Bros.’ studio and streaming business, including legacy TV shows and HBO Max. Paramount, in contrast, wants to buy all of Warner Bros., including cable networks like CNN and TNT in addition to the studio and streaming.
“The Board unanimously determined that the Paramount’s latest offer remains inferior to our merger agreement with Netflix across multiple key areas,” Samuel A. Di Piazza Jr., chair of the Warner Bros. Discovery board of directors, said in a statement Wednesday.
“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. Our binding agreement with Netflix will offer superior value at greater levels of certainty, without the significant risks and costs Paramount’s offer would impose on our shareholders.”