Paramount Skydance is suing Warner Bros. Discovery (WBD) in U.S. court in Delaware, seeking greater clarity on the terms of Netflix’s offer for Warner Bros.’ streaming and studio businesses.
Paramount also plans to nominate director candidates for election to the WBD board at the WBD annual meeting, which it believes will result in a vote against the Netflix deal, according to a letter signed by Paramount CEO and Chairman David Ellison to WBD shareholders.
The “advance notice” period for WBD’s 2026 Annual Meeting will begin in three weeks and remain open for approximately one month. Pursuant to WBD’s Articles of Incorporation and U.S. securities laws, parties may propose directors to the Board of Directors to shareholders during this period. Ellison’s letter also states that Paramount will propose amendments to the company’s articles of incorporation that would require approval from WBD shareholders if Global Networks were to be separated from WBD.
Late Monday (January 12), WBD responded to what it called Paramount’s “unfair” lawsuit, saying in a statement: “Despite six weeks and as many press releases from Paramount Skydance, the company still has not raised prices or addressed the numerous glaring flaws in the proposal.”
The company continued, “Instead, Paramount Skydance seeks to distract attention with frivolous lawsuits and attacks on the Board of Directors that have resulted in unprecedented amounts of shareholder value. Despite multiple opportunities, Paramount Skydance continues to propose a transaction that the Board of Directors unanimously entered into and is no better than the merger agreement with Netflix.”
Earlier this month, WBD’s board again rejected Paramount’s offer for the company, citing a lack of certainty about Paramount’s ability to complete the transaction and Paramount’s dependence on debt, and reiterated its preference for Netflix’s offer.
In Monday’s letter, Ellison reiterated his lack of understanding why WBD’s board voted in favor of Netflix’s proposal.
“We have worked with WBD shareholders to request customary financial disclosures that the board should provide to shareholders when recommending investments,” Ellison said.
“However, WBD did not disclose in each of its 14D-9 filings how it valued the Global Networks stub stock, how it valued the Netflix deal as a whole, how the debt purchase price reduction in the Netflix deal worked, or even what the ‘risk adjustment’ basis for the $30 per share all-cash offer was.”
The letter also states, “While WBD offers a litany of novel reasons to avoid the Paramount deal, what it is unable to do and has never stated is that the Netflix deal is financially superior to our actual proposal.”
On December 5th, Netflix confirmed it would acquire Warner Bros. in a deal valued at $82.7 billion, under which Netflix would acquire the company’s film and television studios HBO Max and HBO, but not Discovery Global. The cash and stock transaction values WBD stock at $27.75 per share, giving the company a total enterprise value of approximately $82.7 billion (equity value: $72 billion).
On December 8, Paramount acquired the entire company in an all-cash bid hostile to WBD shareholders for $30 per share, with a target enterprise value of $108 billion. The WBD Board then reiterated its support for Netflix’s proposal on December 17th.
On December 22nd, Paramount issued a revised offer with a personal guarantee from David Elion’s billionaire father, Larry Ellison. On January 7th, this offer was rejected.
Dear Warner Bros. Discovery Stockholders,
Over the past few days, we have continued to receive the same question following Warner Bros. Discovery’s (“WBD”) decision not to engage with Paramount in its $30 per share cash offer to acquire all of WBD’s stock and the company’s reaffirmation of its commitment to providing a superior offer to WBD stockholders.
Paramount began this process approximately four months ago with a private offer at a significant premium to WBD’s stock price of $12.54, culminating in an all-cash, all-financed offer of $30 per share that we made before WBD began its deal with Netflix. When we learned that the transaction terms were not favorable financially and in terms of the timing and certainty of closing, we decided to make the offer directly to our customers through a tender offer.
We are fully committed to completing the tender offer. However, we understand that unless the WBD Board of Directors decides to exercise its right to engage with us under the Netflix Merger Agreement (the “Netflix Agreement”), this will likely be subject to your vote at a stockholder meeting. I don’t know if it will take place at the next WBD annual meeting or at a special meeting. A “advance notice” period for WBD’s 2026 Annual Meeting will open within three weeks, and Paramount, pursuant to its fiduciary duties, will exercise WBD’s rights under the Netflix Agreement to respond to Paramount’s proposal and appoint a director to enter into a transaction with Paramount. In addition, Paramount plans to propose an amendment to the WBD Articles of Incorporation that would require approval from WBD shareholders for the separation of the global network. If WBD convenes a special meeting ahead of its annual meeting to vote on the Netflix deal, Paramount plans to recruit proxies to oppose its approval. These actions, combined with our tender offer, ensure that you make the final decision as to which offering is better for you.
WBD has presented a series of novel reasons to avoid the Paramount deal, but has never stated that the Netflix deal is financially better than our actual proposal because it is unable to do so. Our $30 in cash per share simply exceeds the complex multivariable consideration for Netflix, which consists of (a) $23.25 in cash, (b) a number of Netflix shares currently worth $4.11 (as of Friday’s close), and (c) future issuance of Global Networks stock, which we analyze to have a capital value of zero1. In addition to not disclosing the value of the proposed Global Networks spin-off, WBD has also not disclosed the mechanism by which the cash and stock consideration paid to you will be reduced by the debt transferred from Global Networks to the Streaming & Studios division.
We have worked with WBD’s shareholders to request customary financial disclosures that the board of directors is required to provide to shareholders when recommending investments. However, WBD did not include any disclosure in its respective 14D-9 filings about how it valued the Global Networks stub stake, how it valued the Netflix deal as a whole, how the debt purchase price reduction in the Netflix deal worked, or even what the basis for the “risk adjustment” in the $30 per share all-cash offer was. WBD shareholders need this information to make informed investment decisions about our offering. And, importantly, Delaware law consistently requires such information to be provided to shareholders. Pursuant to procedures established by Delaware law, we filed suit this morning in Delaware Chancery Court, simply asking the court to direct WBD to provide this information so that WBD stockholders can make informed decisions about whether to subscribe their shares to our offering.
We do not take these actions lightly. Don’t get me wrong. Our goal is to engage in constructive discussions with WBD’s Board of Directors to reach an agreement that is in the best interest of WBD stockholders. From the moment we approached WBD, our goal was to negotiate collaboratively and achieve a successful transaction that was beneficial to both companies, our shareholder groups, and all stakeholders. We remain perplexed that WBD never responded to our Dec. 4 offer, made no attempt to clarify or negotiate the terms of that offer, or trade contract markups with us. Reading the story of WBD’s own process, one is left with the impression that there were very few actual board meetings in the period leading up to the decision to accept the inferior deal with Netflix. And we are surprised at the lack of transparency on WBD’s part regarding basic financial matters. This just doesn’t add up, and is very similar to the calculation of why WBD continues to support an all-cash offer of less than $30 per share to its shareholders.
The best outcome for you and for us is for WBD’s board to exercise its rights under the Netflix contract and engage with Paramount. When that happens, we will work openly and constructively to secure the best path forward for WBD and each of you. We have been committed to listening carefully to any feedback we receive from WBD’s Board of Directors and responding by providing reasonable solutions. That continues to be our mindset and approach.
I believe in our vision for how we can bring these great companies together to deliver for consumers, the creative community, and of course, you. Paramount is fully committed and my family is fully committed. I hope this helps answer the question of what happens next.
Sincerely,
David Ellison, Chairman and Chief Executive Officer, Paramount Skydance Corporation
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