Paramount Escalates Bid for Warner Bros. Discovery With Lawsuit and Board Challenge

Paramount is intensifying its takeover effort for Warner Bros. Discovery, filing a lawsuit and preparing a potential board challenge as it seeks to block WBD’s deal with Netflix.

In a letter sent to WBD shareholders on Monday, Paramount CEO David Ellison said the company has filed suit in Delaware to demand greater financial disclosure related to WBD’s agreement with Netflix. Paramount is also preparing to nominate its own slate of directors to WBD’s board, whom it believes would oppose the Netflix transaction.

Paramount has maintained its $30-per-share all-cash tender offer for WBD, arguing that the proposal is superior to the Netflix deal. WBD’s board recently rejected Paramount’s latest bid, which included a personal financial guarantee from Larry Ellison, saying the offer still failed to address all of the board’s concerns.

WBD reached an agreement with Netflix in December under which the streaming company would acquire WBD’s television and film studios in a transaction valued at $83 billion.

In his letter, Ellison said WBD has not provided shareholders with what he described as customary financial disclosures required when a board recommends a major transaction. He said those missing details include how WBD valued the Netflix deal and how it calculated a risk adjustment used to evaluate Paramount’s competing offer. Paramount said the lawsuit seeks to compel WBD to release that information to shareholders.

With Paramount’s bids repeatedly rejected, Ellison wrote that the outcome may ultimately be decided by shareholder votes. He said Paramount plans to nominate directors at either WBD’s annual meeting or a special meeting, should one be called.

Paramount also plans to propose an amendment to WBD’s bylaws that would require shareholder approval for any separation of its Global Networks business. If WBD schedules a special meeting ahead of its annual meeting, Paramount said it will solicit proxies against approving the Netflix transaction.

“These actions, coupled with our tender offer, ensure that you get the final decision on which offer is better for you,” Ellison wrote to shareholders.