Paramount Skydance stepped up its hostile takeover bid of Warner Bros. Discovery (WBD) today by filing a lawsuit in Delaware Chancery Court against WBD, announcing its intention to fight the Netflix acquisition.
In December, WBD agreed to sell its streaming and movie business to Netflix for $82.7 billion. The deal will spin off WBD’s Global Networks division, which includes WBD’s legacy cable networks, into a separate company called Discovery Global. But in December, Paramount submitted a hostile takeover bid and amended its bid for WBD. Subsequently, the company aggressively tried to convince WBD shareholders that its $108.4 billion offer for WBD was better than the Netflix deal.
Today, Paramount CEO David Ellison wrote a letter to WBD shareholders informing them of Paramount’s lawsuit. The lawsuit requests the court to force WBD to disclose “how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt in the Netflix transaction works, or even what is the basis of the ‘risk adjustment’ of Paramount’s $30 per share all-cash offer”. Netflix’s offer is worth $27.72 per share, which includes $23.25 in cash and shares of Netflix common stock. Paramount hopes this information will encourage more WBD shareholders to tender their shares under Paramount’s offering by the January 21 deadline.
Before WBD announced the Netflix deal, Paramount publicly questioned the fairness of WBD’s bidding process. Paramount has since argued that its bid was not properly considered or negotiated.
In her letter today, Alison wrote:
We are surprised that WBD never responded to our December 4 proposal, never attempted to clarify or negotiate any of the terms of that proposal, nor trade the markup of the contracts with us. Even when we read WBD’s own story about its process, we are left surprised that there were few actual board meetings in the period before the decision to accept a low-level transaction with Netflix. And we are surprised by the lack of transparency on the part of the WBD regarding basic financial matters. It doesn’t add up – it’s much like the mathematics of how WBD continues to favor its shareholders taking less than our $30 per share all-cash offer.
Additionally, Paramount plans to nominate board directors for election at WBD’s annual shareholder meeting who will fight against approval of the Netflix deal. Ellison’s letter said the window for nominations would open in three weeks.
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