Paramount Initiates Legal Action Against Warner Bros. and Begins Proxy Battle

Paramount Intensifies Bid to Block Warner Bros. and Netflix Merger

Paramount Skydance Corp. has escalated its efforts to prevent a merger between Warner Bros. Discovery Inc. and Netflix Inc., announcing plans to nominate new board members at Warner Bros. to oppose the deal.

Led by David Ellison, Paramount has also initiated legal action against Warner Bros., seeking to compel the company to reveal further information about Netflix’s $82.7 billion acquisition proposal. This move marks a new chapter in the heated contest between Paramount and Netflix, a rivalry that has drawn significant attention from both Hollywood insiders and financial markets.

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For the past four months, Paramount has been actively pursuing an acquisition of Warner Bros., presenting several proposals that have all been turned down by Warner Bros.’s board. Instead, Warner Bros.—the studio behind major franchises like Batman and Harry Potter, and the parent of HBO—opted in early December to accept Netflix’s offer to purchase its studio and streaming operations for $27.75 per share in a combination of cash and stock.

Paramount maintains that its own bid, valued at $30 per share for the entirety of Warner Bros., is more advantageous and comes with fewer complications. In a letter released to shareholders, Ellison stated his intention to contest the Netflix agreement at either the company’s annual meeting or a special session convened for the deal’s approval.

“We remain fully committed to completing our tender offer,” the letter emphasized.

Warner Bros. has announced plans to separate its cable television assets, known as Discovery Global, later this year. The company argues that the potential benefits from this move make the Netflix proposal more appealing. Paramount, however, contends that Discovery Global shares have little value and insists that its all-cash offer is a better deal for shareholders. Ellison has also accused Warner Bros. of lacking transparency throughout the negotiation process.

According to Paramount’s legal complaint, “While our all-cash proposal is straightforward, the board has failed to provide clear information regarding the complex cash and stock arrangement they are recommending from Netflix.”

The lawsuit, filed in Delaware Chancery Court, alleges that Warner Bros. did not supply shareholders with sufficient details to make an informed decision. Paramount is asking the court to require Warner Bros. and its board to correct any misleading statements and to disclose information about the valuation of the Netflix deal, analyses from financial advisors, and the board’s rationale for risk adjustments in their decision-making process.

Further Developments

The complaint also claims that the board has withheld essential valuation data that investors need to make sound choices, while urging them to reject Paramount’s offer in favor of Netflix’s, which Paramount argues is both less financially attractive and less likely to gain regulatory approval.

On Monday morning in New York, Warner Bros. shares dropped by 1.4%, Netflix saw a slight increase, and Paramount’s stock rose by 1%.

Shareholders have until January 21 to decide whether to accept Paramount’s tender offer.

Reporting assistance by Jef Feeley.

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