Paramount plots a proxy battle and sues Warner Bros. for the details of the Netflix contract
Paramount Skydance filed a lawsuit on Monday against Warner Bros. Discovery, opening a new tab to learn more about a rival $82.7 billion agreement with Netflix, intensifying the fight to take over one of the most illustrious Hollywood companies.
In one of its more aggressive moves to persuade investors that its $108.7 billion all-cash offer is better than Netflix’s cash-and-stock transaction, the David Ellison-led company also said that it intended to propose directors to Warner Bros.’ board.
Warner Bros., its coveted film and television studios, and its vast content library, which includes “Harry Potter” and the DC Comics world, have been the focus of a fierce competition between Paramount and Netflix.
Warner Bros. advised shareholders to vote in favor of the Netflix merger after rejecting Paramount’s most recent bid last week.
Paramount also stated in a letter to shareholders that it would suggest changing Warner Bros.’ bylaws to mandate shareholder consent for any division of the media behemoth’s cable TV division, which is crucial to the Netflix acquisition.
In contrast to Netflix’s cash-and-stock offer of $27.75 per share for the studios and streaming assets, Paramount claims that its all-cash bid of $30 per share for the entirety of Warner Bros. will more easily get over regulatory obstacles.
In order to compel the release of the financial analysis supporting the Warner Bros. board’s approval of the Netflix merger, Paramount filed the complaint in the Delaware Court of Chancery. “RAISE THE BID. MONEY TALKS”
Following yet another rejection by Warner Bros.’ board, the parent company of CBS stated last week that the cable spinoff was essentially worthless and restated its altered version. Paramount has upped its actions with Monday’s lawsuit, but it hasn’t raised the amount it is willing to pay yet. “I don’t think the lawsuit matters much,” the statement reads. If they go all out that way, it would take a very long time to move through the legal system,” said Craig Huber, an analyst with Huber Research Partners. “If they want Warner Bros bad enough, raise the bid. Money talks.”
As part of the $4.7 billion in additional expenses to terminate the pact, Warner Bros. has also stated that it will incur Netflix a $2.8 billion termination fee if it withdraws from the agreement.
“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,” Paramount wrote in the investor letter, adding that the amended proposal included $54 billion in debt and $40 billion in equity personally guaranteed by Oracle co-founder Larry Ellison, father of Paramount CEO David Ellison. “Unless the WBD board of directors decides to exercise its right to engage with us under the Netflix merger agreement, this will likely come down to your vote at a shareholder meeting,” the letter said.
Investors considering whether to submit their shares to Paramount before the offer, which may be extended, expires on January 21 must be made aware of Warner Bros.’ financial analysis, according to Paramount.
“Time is of the essence,” stated Paramount in the complaint against Warner Bros., prominent investor John Malone, and CEO David Zaslav, among others. “Any decision concerning an extension will depend, in part, on the number of shares tendered.”
The complaint was “meritless,” according to Warner Bros., which also noted that Paramount had not yet “raised the price or addressed the numerous and obvious deficiencies of its offer.”
A request for comment from Netflix was not immediately answered.
Warner Bros. shares fell 1.6% on Monday, while Paramount’s were up 0.4% and Netflix’s were unchanged.
