Paramount Is Suing Warner Bros. Over the Netflix Deal

This story has been updated with new reporting.

Fresh off a New York cover and a Golden Globes appearance, David Ellison is ratcheting up his push for Warner Bros. Discovery. Today his company Paramount Skydance is suing WBD and its CEO, David Zaslav, after the company’s board rejected Paramount’s latest bid in favor of Netflix’s — the latest chapter in a saga that’s rattled the industry. Paramount wants the whole company, while Netflix’s bid would buy its streaming and studios units, leaving its linear networks to be spun off. That difference is part of what’s driving Paramount’s lawsuit.

“WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its ‘risk adjustment’ of our $30 per share all-cash offer,” Ellison wrote in a letter to WBD shareholders on Monday. “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 as to whether to tender their shares into our offer.” 

As part of this escalation, Paramount is also nominating a slate of directors to be elected to WBD’s board at its next annual shareholders meeting who will engage on Paramount’s offer. In other words, for those who remember their Succession 101 coursework, we’re looking at a good ol’-fashioned proxy fight. Rebuffed by WBD’s current board, Ellison is eager to pack it with allies to convince shareholders his way is the best path forward.

WBD fired back at the Paramount lawsuit with a statement this afternoon. “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,” a company spokesperson told Vulture. “Instead, Paramount Skydance is seeking to distract with a meritless lawsuit and attacks on a board that has delivered an unprecedented amount of shareholder value. In spite of its multiple opportunities, Paramount Skydance continues to propose a transaction that our board unanimously concluded is not superior to the merger agreement with Netflix.” 

Paramount indeed hasn’t raised its $30-per-share bid, despite making other assurances, such as matching Netflix’s breakup fee and offering guarantees that David Ellison’s megabillionaire father, Larry, backed the deal and that the Ellisons would not revoke or otherwise mess with their family trust while the transaction was pending. In his letter, he asked WBD shareholders to tender their shares to Paramount and again questioned both Netflix’s lower price for its bid as well as WBD’s process throughout the bidding war, writing, “It just doesn’t add up.” Safe bet that Ellison didn’t get satisfactory answers at last night’s Golden Globes, where he sat within spitball range of Zaslav and Ted Sarandos.