After having its latest takeover bid rejected by the Warner Bros. Discovery board last week, Paramount is now taking legal action in its effort to seize control of the storied Hollywood company.
On Monday, Paramount CEO David Ellison sent a letter to Warner Bros. Discovery shareholders informing them his company has filed a lawsuit aimed at compelling WBD to disclose critical information about how the board is valuing its bid in the context of WBD’s agreement with Netflix. Paramount claims that WBD has failed to provide its shareholders with key financial disclosures required to make an informed decision regarding where to tender their shares.
“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,” the letter reads.
Specifically, Paramount says that WBD has not been transparent in how it valued Discovery Global, the stub entity which will carry WBD’s cable assets should its agreement with Netflix move forward. Paramount argues that its $30 per share all-cash bid for the whole of WBD, including the company’s cable assets, is superior to the $27.75 per share Netflix is paying under the terms of its deal, which doesn’t include the cable assets. Additionally, Paramount claims shareholders have not gotten a clear picture of how WBD has assessed other parts of its offer, as well as the agreed upon Netflix deal.
“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,” Paramount claims.
Paramount’s lawsuit was filed in Delaware Chancery Court on Monday.
In addition to the legal action, Paramount is also preparing a “proxy fight for [WBD] board seats,” in an effort to place individuals favorable to its own offer on the WBD board, according to the Wall Street Journal. “Paramount argued it was necessary to nominate its own candidates who will engage with Paramount’s offer, in accordance with their fiduciary duties, if Warner’s current board members don’t,” the report read.
It seems that Paramount’s effort to takeover WBD has turned procedural, at least for now. Perhaps there will be another, higher bid to be submitted in the future, as some WBD shareholders have predicted.
But one thing is certain: Paramount and David Ellison are continuing a full-court press for WBD that doesn’t look likely to end anytime soon.
About Drew Lerner
Drew Lerner is a staff writer for Awful Announcing and an aspiring cable subscriber. He previously covered sports media for Sports Media Watch. Future beat writer for the Oasis reunion tour.