Paramount Skydance sues WBD, lines up proxy fight to challenge Netflix deal

New Delhi: Paramount Skydance has stepped up its hostile bid for Warner Bros. Discovery (WBD) by filing a lawsuit in the Delaware Chancery Court and signalling a proxy fight to challenge WBD’s pending $82.7 billion deal with Netflix.

In the complaint filed on January 12, Paramount Skydance named WBD, CEO David Zaslav and major investor John Malone as defendants, alleging the board breached fiduciary duties by not fully disclosing financial analyses and valuations behind the Netflix transaction.

Paramount Skydance is seeking details on how WBD valued the “stub equity” of its cable networks business that is to be spun off as part of the Netflix structure, and how the board assessed the deal’s overall valuation and related adjustments, including the basis for “risk-adjusting” Paramount’s competing bid.

It is also asking the court to order changes to WBD’s bylaws that would require shareholder approval for any separation of the cable business, a central element of the Netflix agreement, under which Netflix would acquire WBD’s studios and streaming assets while the networks are split into a separate company.

WBD agreed in December to a cash-and-stock transaction with Netflix valued at $27.75 per share (enterprise value $82.7 billion), while planning to spin off its Global Networks business.

Paramount Skydance has countered with an all-cash offer of $30 per share for all of WBD, valuing the bid at about $108.4 billion, backed by $40 billion of equity supported by Oracle co-founder Larry Ellison and $54 billion of debt, according to Reuters.

In a letter to WBD shareholders, Paramount Skydance CEO David Ellison said “time is of the essence” ahead of the tender offer’s January 21 expiry, arguing shareholders should have access to fuller information on the Netflix deal before deciding.

WBD has rejected Paramount’s proposal twice, citing concerns around the offer and saying the Netflix agreement delivers superior value. It has called the lawsuit “meritless” and said Paramount has not raised its price or addressed what it described as deficiencies in its bid.

If WBD were to walk away from the Netflix deal, it would face a $2.8 billion termination fee and $4.7 billion in associated costs, according to published reports.

Paramount Skydance has also said it intends to nominate its own slate of directors for election to WBD’s board at the 2026 annual meeting, setting up a proxy contest that could force a shareholder showdown over the competing deals.