Paramount files lawsuit seeking Netflix deal details, plans board challenge as takeover battle for Warner Bros intensifies.
Paramount Skydance on Monday sued Warner Bros Discovery to force disclosure of details behind the media giant’s $82.7 billion deal with Netflix, escalating a high-stakes battle for control of one of Hollywood’s most storied studios.
The David Ellison-led company also said it plans to nominate directors to Warner Bros’ board, marking one of its most aggressive moves yet to convince investors that its $108.7 billion all-cash bid is superior to Netflix’s cash-and-stock offer.
Paramount and Netflix are locked in a heated contest for Warner Bros, its prized film and television studios and its extensive content library, which includes the “Harry Potter” franchise and the DC Comics universe.
Warner Bros last week rejected Paramount’s latest proposal and advised shareholders to vote in favour of the Netflix deal.
In a letter to investors, Paramount said it would also propose an amendment to Warner Bros’ bylaws that would require shareholder approval for any separation of the company’s cable television business, a central feature of the Netflix transaction.
Paramount argues its all-cash bid of $30 per share for the whole company is superior to Netflix’s $27.75-per-share offer for the studios and streaming assets, and would more easily clear regulatory hurdles.
The lawsuit, filed in Delaware’s Court of Chancery, seeks to compel Warner Bros to disclose the financial analysis behind the board’s support for the Netflix merger. Paramount said last week that the value of Warner Bros’ planned cable spinoff was virtually worthless and reiterated its amended offer after another rejection.
With Monday’s filing, Paramount stepped up its campaign, though it has not raised the price it is willing to pay.
“I don’t think the lawsuit matters much. It would take ages to get through the court system if they full-on go that route,” said Craig Huber, analyst at Huber Research Partners. “If they want Warner Bros bad enough, raise the bid. Money talks.”
Warner Bros has said it would owe Netflix a $2.8 billion termination fee if it abandoned the agreement, part of an estimated $4.7 billion in total costs to exit the deal.
The amended Paramount proposal includes $40 billion in equity personally guaranteed by Oracle co-founder Larry Ellison, father of Paramount CEO David Ellison, and $54 billion in debt.
“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,” Paramount wrote.
“Unless the WBD board of directors decides to exercise its right to engage with us under the Netflix merger agreement, this will likely come down to your vote at a shareholder meeting,” the company added.
Paramount said disclosure of Warner Bros’ financial analysis is crucial for shareholders deciding whether to tender their shares before the offer, which can be extended, expires on Jan. 21.
“Time is of the essence,” Paramount said in the lawsuit against Warner Bros, CEO David Zaslav and key investor John Malone. “Any decision concerning an extension will depend, in part, on the number of shares tendered.”
Warner Bros dismissed the suit as “meritless,” saying Paramount had yet to “raise the price or address the numerous and obvious deficiencies of its offer.”
Netflix did not immediately respond to a request for comment.
Warner Bros shares fell 1.6% on Monday, while Netflix was flat and Paramount rose 0.4%.
