Paramount Suing WBD, Vows Proxy Fight Over Netflix Deal
Paramount Skydance is ratcheting up its fight to try to buy Warner Bros. Discovery, saying Monday that it's suing WBD in Delaware Chancery Court. Paramount also said it will nominate a slate of directors for WBD's annual meeting who would enter into a transaction with Paramount rather than Netflix. WBD's board has recommended that shareholders support Netflix's proposed purchase of WBD (see 2601070048).
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“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," WBD said in an emailed statement. Paramount instead "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."
Former FCC aide Adonis Hoffman told us via email that the lawsuit "makes the point that [Paramount's] effort is no longer just about price -- it is about process, corporate governance, fiduciary duty, and disclosure asymmetry."
David Brail, manager of a hedge fund that holds WBD stock, wrote on social media that Paramount "is skillfully delivering several messages here 1) we are not bumping (yet), because our bid is better 2) we are not going away 3) we know that you know that your own holders will not accept an inferior Netflix bid, and we will give them a forum to demonstrate this, and 4) if you persist in favoring Netflix, you may suffer the humiliation of being voted out of your seat." However, Paramount "really just wants to negotiate a deal," Brail added.
Paramount said Monday it will also propose an amendment to WBD's bylaws to require WBD shareholder approval for any separation of global networks. WBD said in June that it planned to split into two companies: a studios and streaming business, with assets including HBO Max and Warner Bros. Studios, and a global networks business, with assets including CNN, TNT Sports in the U.S., Discovery and the Discovery+ streaming service (see 2506090024).
If WBD calls a special meeting ahead of its annual meeting to vote on a deal with Netflix, Paramount said it would solicit proxies against such approval. "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 said that by its calculation, the global networks stock should be priced at $0.
In addition, Paramount said it has asked WBD for -- but hasn't gotten -- financial disclosures about such issues as how WBD valued the global networks' equity and the overall Netflix transaction and what the basis was for its risk adjustment of Paramount's $30-a-share cash offer. "WBD shareholders need this information to make an informed investment decision on our offer -- and importantly, Delaware law has consistently required that such information be provided to shareholders," Paramount said, noting that its suit is asking the court to direct WBD to provide that information.