Paramount takes legal action against WBD as push to derail Netflix deal intensifies
David Zaslav (left) and David Ellison
Paramount is taking legal action against Warner Bros Discovery (WBD), and looking to launch a proxy battle, as it attempts to force WBD’s board to engage with its $30-per-share offer to acquire the media company.
As it ramps up efforts to blow up Netflix’s definitive agreement to buy WBD’s studio and streaming assets, Paramount on Monday said it had filed a lawsuit in Delaware Chancery Court seeking “full disclosure” about how WBD’s board arrived at its decision to sell to Netflix.
In a letter to WBD shareholders, Paramount said WBD’s board had given “increasingly novel reasons” for declining to engage with Paramount’s offer, which values the entirety of WBD at US$108.4bn.
Paramount argues that its US$30 per share offer for all of WBD is superior to Netflix’s agreement to buy the studio and streaming assets for US$27.75 per share. Under the Netflix deal, WBD’s linear networks would be spun off into a separate company, Discovery Global.
Paramount claimed last week that the spin-off has an equity value of zero given the high levels of debt it will carry. As a result, Paramount claims its offer is superior to Netflix’s. It has given WBD shareholders until January 21 to tender their shares.
“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,” said Paramount in its letter to WBD shareholders on Monday.
“Our $30 per share in cash is simply more than Netflix’s complex multi-variable consideration comprised of (a) $23.25 in cash plus (b) a number of Netflix shares currently worth $4.11 (at Friday’s close) plus (c) the to-be-issued Global Networks equity which we have analyzed as having zero equity value.”
WBD has rejected multiple offers from Paramount, both before and after the official sale process started in November.
David Zaslav-led WBD has asserted that Paramount’s bid remains “inferior” to Netflix’s, despite the fact Larry Ellison, the world’s second-richest person and the father of Paramount CEO and chairman David Ellison, has made an “irrevocable personal guarantee” to backstop the deal.
Last week, WBD’s board called Paramount’s offer “not superior or even comparable” to Netflix’s, reiterating that the Ellison-led company had “failed to submit the best proposal for WBD shareholders despite clear direction from WBD on both the deficiencies and potential solutions.”
Among WBD complaints are several red flags in Paramount’s financing plan, which could hit shareholders if the deal does not come to fruition. However, during an interview on CNBC business show Squawk Box, WBD board chair Samuel Di Piazza Jr did appear to invite Paramount to increase its bid.
For its part, Paramount claims that its offer is already superior to Netflix’s. It has been signaling its intention to pursue legal action for several weeks, accusing WBD’s board of running biased sale process even before it announced its definitive agreement with Netflix on December 4.
Elsewhere in its Monday letter, Paramount said it was “struck” by how few board meetings took place in the lead-up to accepting Netflix’s offer. It added: “And we are surprised by the lack of transparency on WBD’s part regarding basic financial matters. It just doesn’t add up – much like the math on how WBD continues to favor taking less than our $30 per share all-cash offer for its shareholders.”
Paramount also said that ahead of WBD’s 2026 annual meeting, it intends to nominate a slate of directors who will “solicit against the approval of the Netflix transaction.” As well, Paramount said it will propose an amendment to “WBD’s bylaws to require WBD shareholder approval for any separation of Global Networks.”
For its part, Netflix says it is forging ahead with securing regulatory approvals and broader thinking about how to unite its streaming platform with assets including HBO Max, HBO, Warner Bros studio and its vast library. Last week it said it was already “engaging” with the US Department of Justice and the European Commission, which will both be reviewing the deal on antitrust grounds.
“The best outcome for you and for us would be if WBD’s Board would exercise the right it has under the Netflix Agreement to engage with Paramount,” said David Ellison in his letter.
“If it does so, we will be open and constructive to secure the best path forward for WBD and each of you. We have demonstrated our willingness to listen carefully to any feedback we receive from WBD’s Board and to respond by offering reasonable solutions – and that remains our mindset and approach.
“I believe in our vision for how we can bring these great companies together and deliver for consumers, the creative community and of course, for you. Paramount is committed, my family is committed, and hopefully this helps answer the question of what comes next.”
WBD responded later on Wednesday, calling the lawsuit “meritless” and reiterating its claim that Paramount’s offer does not match up to its signed agreement with Netflix.
“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,” said WBD.
“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.”
