Paramount Skydance sued Warner Bros. Discovery on Monday for more information on its rival $82.7 billion deal with Netflix, intensifying the battle to gain control of one of Hollywood’s most famous studios.
The David Ellison-led company also said it planned to nominate directors to Warner Bros.’s board in one of its most aggressive moves yet to convince investors that its $108.7 billion all-cash bid is better than Netflix’s cash-and-stock deal.
Paramount and Netflix have been in a heated battle for Warner Bros., its prized film and television studio and its extensive content library, which includes the Harry Potter and DC Comics universes.
Warner Bros. last week rejected Paramount’s latest proposal, advising shareholders to vote in favor of the Netflix deal.
In a letter to shareholders, Paramount also said it would propose an amendment to Warner Bros.’s bylaws that would require shareholder approval to spin off the media giant’s cable TV business, which is crucial to the Netflix deal.
Paramount’s argument is that its all-cash bid of $30 per share for all of Warner Bros. is better than Netflix’s cash-and-stock offer of $27.75 per share for the studio and streaming assets and will more easily clear regulatory hurdles.
Paramount filed a lawsuit in the Delaware Court of Chancery, demanding disclosure of the financial analysis behind the Warner Bros. board’s support for the Netflix merger.
Increase bid. money Talks
The CBS parent said last week that the value of the Warner Bros. cable spinoff was virtually worthless and reiterated its revised bid after another rejection from Warner Bros.’s board. With Monday’s lawsuit, Paramount has stepped up its action, but it has not yet increased the price it is willing to pay.
“I don’t think the lawsuit makes much sense. If they go all the way down that path it will take years to go through the court system,” said Craig Huber, analyst at Huber Research Partners. “If they want Warner Bros. badly enough, raise the bid. Money talks.”
Warner Bros. also said it would have to pay a $2.8 billion termination fee if Netflix backed out of the deal, part of $4.7 billion in additional costs to terminate the deal.
The revised offer included $40 billion of equity and $54 billion of debt personally guaranteed by Oracle co-founder Larry Ellison, father of Paramount CEO David Ellison.
“WBD has increasingly provided new reasons for avoiding a transaction with Paramount, but what he never said, because he couldn’t say, is that the Netflix transaction is financially better than our original offer,” Paramount wrote in an investor letter.
“Unless the WBD board of directors decides to exercise its right to join us under the Netflix merger agreement, this will be subject to your vote at the shareholder meeting,” it said.
Paramount argued that disclosure of Warner Bros.’s financial analysis is important for investors considering whether to tender their shares to Paramount before the offer – which could be extended – expires on January 21.
“Timing is of the essence,” Paramount said in the lawsuit against Warner Bros., CEO David Zaslav and others, including key investor John Malone. “Any decision regarding expansion will depend, in part, on the number of shares tendered.”
Warner Bros. said in a statement that the lawsuit was “meritless”, adding that Paramount had not yet “increased the price or addressed the many and obvious shortcomings of its proposal”.
Netflix did not immediately respond to a request for comment.
Warner Bros. shares were down 1.6% on Monday, while Netflix was flat and Paramount was up 0.4%.