Paramount Skydance is suing Warner Bros Discovery (WBD) in a US court in Delaware in an effort to gain greater clarity on the terms of Netflix’s offer for the Warner Bros streaming and studios business.
Paramount also plans to nominate a slate of directors for election to the WBD board at the WBD annual meeting that it believes would vote against the deal with Netflix, according to a letter signed by Paramount CEO and chairman David Ellison to the WBD shareholders and published in full below.
An ‘advance notice’ window for WBD’s 2026 annual meeting opens in three weeks and will remain open for about one month. Under WBD bylaws and US securities laws, a party can propose board directors to shareholders during this time. Ellison’s letter stated that Paramount will also propose an amendment to the bylaws to require WBD shareholder approval for any separation of Global Networks from WBD.
Late on Monday (January 12) WBD responded to what it called Paramount’s “meritless” lawsuit, saying in a statement: “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.”
The company continued, “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.”
Earlier this month, WBD’s board of directors once again rejected Paramount’s offer for the company and reiterated its preference for Netflix’s offer, owing to a lack of certainty around Paramount’s ability to close its transaction and Paramount’s dependence on borrowed money.
In Monday’s letter, Ellison reiterated a lack of understanding as to why WBD’s board has gone with the Netflix offer.
“Along with the WBD shareholders, we have asked for the customary financial disclosure a board is supposed to provide shareholders when making an investment recommendation,” stated Ellison.
“But in each of its 14D-9 filings, WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its ‘risk adjustment’ of our $30 per share all-cash offer.”
The letter also stated: “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.”
On December 5, Netflix confirmed it would acquire Warner Bros in a deal worth $82.7bn, under which Netflix will acquire its film and television studios, HBO Max and HBO, but not Discovery Global. The cash and stock transaction was valued at $27.75 per WBD share with a total enterprise value of approximately $82.7bn (equity value of $72bn).
On December 8, Paramount went directly to the WBD shareholders with its hostile all-cash bid to acquire all of the company for $30 a share that gave the target an enterprise value of $108bn. The WBD board then reiterated its support for the Netflix offer on December 17.
On December 22, Paramount issued an amended offer with a personal guarantee from David Ellion’s billionaire father Larry Ellison. On January 7, this offer was rejected.
Dear Warner Bros. Discovery Shareholder,
Over the last few days, following the decision by Warner Bros. Discovery (“WBD”) not to engage with Paramount on our $30 per share cash offer to acquire all of WBD, and our reaffirmation of our commitment to delivering our superior offer to WBD shareholders, we keep getting the same question: what happens next?
Paramount started this process about four months ago with a private offer at a significant premium to WBD’s $12.54 share price, and our pursuit culminated in the $30 per share all-cash, fully financed proposal we made before WBD entered into the Netflix transaction. When we learned of the terms of that transaction, which are inferior both financially and from the standpoint of timing and certainty of closing, we decided to bring our offer directly to you, through our tender offer.
We are committed to seeing our tender offer through. We understand, however, 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 come down to your vote at a shareholder meeting. We do not know whether that will be at WBD’s upcoming annual meeting or a special meeting. The “advance notice” window for WBD’s 2026 annual meeting opens in three weeks, and Paramount will nominate a slate of directors who, in accordance with their fiduciary duties, will exercise WBD’s right under the Netflix Agreement to engage on Paramount’s offer and enter into a transaction with Paramount. In addition, Paramount will propose an amendment to WBD’s bylaws to require WBD shareholder approval for any separation of Global Networks. If WBD calls a special meeting ahead of its annual meeting to vote on the Netflix Agreement, Paramount will solicit proxies against such approval. These actions, coupled with our tender offer, ensure that you get the final decision on which offer is better for you.
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. 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 value1. In addition to not disclosing the value of the to-be-issued Global Networks spin off, WBD has not disclosed the mechanism by which any debt transferred from Global Networks to the Streaming & Studios segment reduces the cash and stock consideration payable to you.
Along with the WBD shareholders, we have asked for the customary financial disclosure a board is supposed to provide shareholders when making an investment recommendation. But in each of its 14D-9 filings, WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its “risk adjustment” of our $30 per share all-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. Following the process prescribed under Delaware law, we filed suit this morning in Delaware Chancery Court to ask the court to simply direct WBD to provide this information so that WBD shareholders have what they need to be able to make an informed decision as to whether to tender their shares into our offer.
We do not undertake any of these actions lightly. Make no mistake, our goal remains to have constructive discussions with WBD’s Board to reach an agreement that is in the best interests of WBD shareholders. Our objective from the moment we approached WBD was for a collaborative negotiation and a successful transaction that would be a win for both companies, both shareholder groups and all stakeholders. We remain perplexed that WBD never responded to our December 4th offer, never attempted to clarify or negotiate any of the terms in that proposal, nor traded markups of contracts with us. Even as we read WBD’s own narrative of its process, we are struck that there were few actual board meetings in the period leading up to the decision to accept an inferior transaction with Netflix. 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.
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. 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.
Sincerely,
David Ellison , Chairman and Chief Executive Officer Paramount Skydance Corporation
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