Paramount Skydance Corp (NYSE:PSKY) has markedly intensified its confrontation with Warner Bros. Discovery (NASDAQ:WBD) by launching a legal proceeding requiring disclosure of critical financial information concerning Warner Bros.’ nearly $83 billion transaction with Netflix Inc (NASDAQ:NFLX). Executed on a Monday, the lawsuit is accompanied by Paramount CEO David Ellison’s concurrent effort to initiate a proxy battle aimed at replacing the existing Warner Bros. board with directors who would entertain negotiations with Paramount's leadership.
Ellison expressed his growing dissatisfaction directly in an open letter, questioning Warner Bros.’ reluctance to engage in substantive talks: "We remain perplexed," he stated, "that WBD never attempted to clarify or negotiate any of the terms." This formality, according to Ellison, is essential to provide Warner Bros.' shareholders with the transparency necessary to make an informed decision regarding their investments.
"We filed suit this morning in Delaware Chancery Court to ask the court to simply direct WBD to provide this information so that WBD shareholders have what they need to be able to make an informed decision," Ellison explained.
This legal development follows Warner Bros. Discovery’s board reiterating, for the umpteenth time, its endorsement of the Netflix deal and advising shareholders against Paramount’s amended acquisition offer, which was introduced in late December. Paramount contends that Warner Bros.’ disclosures lack adequate detail on the valuation methodologies for elements integral to the Netflix transaction, specifically the Global Networks division and the calculation of debt reductions.
Paramount argues that without these disclosures, shareholders are deprived of the full context needed to properly evaluate the competing $30-per-share all-cash offer Paramount has tabled. Ellison elaborated on this concern in his communication, noting the omission of crucial information:
- How the Global Networks stub equity is valued.
- The valuation processes applied to the Netflix transaction holistically.
- The computation and impact of purchase price adjustments related to debt within the Netflix transaction.
- The underlying basis for Warner Bros.’ risk adjustments applied to Paramount’s offer.
In response, Warner Bros. Discovery characterized the lawsuit as "meritless," emphasizing that Paramount has not improved upon its $30-per-share bid despite multiple statements and six weeks of engagement. The company suggested that Paramount’s recourse should be to increase the offer price rather than pursue legal avenues.
"Despite six weeks and just as many press releases from Paramount Skydance, it has yet to raise the price or address the numerous and obvious deficiencies of its offer," Warner Bros. stated.
The Netflix deal encompasses a $27.75-per-share acquisition pricing for Warner Bros.’ film and television studios, HBO brands, and gaming units, subsequent to the planned spinoff of its Global Networks business during the current year. Paramount further asserts, referencing Warner Bros.’ own projections, that shares of the emerging Discovery Global entity could potentially become worthless.
Underscoring its strategic approach, Paramount intends to propose its candidates to join the Warner Bros. board ahead of the company’s 2026 shareholder meeting. The intent is to rally shareholders against the Netflix transaction’s approval.
Despite adopting confrontational legal and proxy tactics, Ellison conveyed a willingness to engage in productive conversations with Warner Bros.’ board. Nevertheless, he underscored the absence to date of any demonstration by Warner Bros. proving that the Netflix deal holds superior financial merit compared to Paramount’s cash proposal.
Market Response and Stock Performance
Following these developments, shares of Paramount Skydance Corp recorded a marginal gain of 0.16%, closing at $12.17 as of Monday outside normal trading hours, as per Benzinga Pro data. Contrastingly, Warner Bros. Discovery’s shares declined by 1.68% to $28.40 on Monday, after having appreciated over 136% in the previous six months.
The ongoing dispute between Paramount Skydance and Warner Bros. Discovery brings into sharp focus the complexities of high-stakes media acquisition deals and the significant role of shareholder transparency in corporate governance. Paramount’s aggressive legal strategy and proxy campaign reflect mounting pressure to unlock clearer financial insights that could sway shareholder sentiment and influence the final outcome of this contest for control over major entertainment assets.