Paramount Skydance refuses to accept repeated rejections of its acquisition proposals for Warner Bros. Discovery (WBD). Following the dismissal of several offers, including a latest aggressive one that WBD's board urged investors to turn down, Paramount is now pursuing legal action and initiating a proxy contest.
In a communication sent to investors on Monday, Paramount's chief executive David Ellison announced that the firm has initiated proceedings in Delaware's Chancery Court. The suit demands greater transparency regarding WBD's forthcoming agreement with Netflix and the evaluation process that favored it. Paramount contends that WBD has withheld essential details necessary for investors to assess alternative proposals, such as the assessment of the proposed spin-off of cable networks under Discovery Global (also referred to as Global Networks in documents). Under the Netflix arrangement, Discovery Global would operate independently as a listed entity, whereas Paramount's proposal incorporated these holdings.
Paramount is intensifying its strategic efforts by planning to propose a group of board candidates for WBD's 2026 shareholder gathering. The objective is to secure a board willing to consider Paramount's terms within the framework of WBD's Netflix merger pact.
Should WBD convene an extraordinary assembly to ratify the Netflix merger prior to the annual event, Paramount vows to rally proxy support to oppose it. Additionally, it aims to advocate for an amendment mandating investor consent for any detachment of Discovery Global. This move appears designed to amplify concerns—genuine or otherwise—about investors receiving compensation for their WBD holdings in the Netflix merger without accounting for Discovery Global's worth.
Paramount insists its proposal surpasses Netflix's in merit, while WBD argues that the bid delivers inadequate compensation and that Paramount has not presented an optimal offer, even after receiving explicit guidance from WBD on shortcomings and remedies. The legal challenge seeks to compel WBD to detail the reasoning behind endorsing the Netflix transaction over Paramount's alternative.
WBD has raised doubts about the feasibility of completing a Paramount transaction, pointing to the heavy borrowing the smaller company would need to undertake for a debt-financed acquisition.