Paramount Skydance plans to nominate directors to Warner Bros Discovery’s (WBD) board to vote against the approval of its deal with Netflix, and filed a lawsuit seeking disclosure of financial information related to the $82.7bn (£61.4bn) agreement.
In a letter sent to WBD investors on Monday, Paramount said it would nominate directors for election at the company’s annual meeting, which is usually held in June, to try to derail the deal with Netflix, which was agreed in December.
To win what is known as a proxy fight, Paramount will have to convince enough WBD investors to cast their votes in favour of its nominees and replace existing, or new, directors proposed by WBD’s board.
Paramount is attempting to secure its own $108.4bn takeover of WBD. Its bid has been backstopped by a personal $40bn guarantee by Larry Ellison, a co-founder of Oracle.
Under the Netflix deal, the streaming company is poised to take control of WBD’s prize assets such as Warner Bros, the studio behind franchises including Harry Potter, Superman and Batman, as well as HBO, home to shows including Game of Thrones, The White Lotus and Succession.
Paramount also said on Monday that it had filed a lawsuit seeking disclosure of “basic information” – including how WBD has valued the global networks operation, which includes CNN, the Cartoon Network and the Discovery Channel, which Netflix is not buying – so that WBD shareholders can “make an informed decision”.
In the letter, David Ellison, the chief executive of Paramount, said: “We are committed to seeing our tender offer through. We understand, however, that 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.”
Paramount said the “slate of directors” it intended to nominate would then engage with the company to assess the merits of its takeover bid.
Paramount also said it intended to propose an amendment to WBD’s bylaws to require shareholder approval for the proposed spin-off of the global networks business.
“If WBD calls a special meeting ahead of its annual meeting to vote on the Netflix agreement, Paramount will solicit proxies against such approval,” David Ellison said. “These actions, coupled with our tender offer, ensure that you get the final decision on which offer is better for you.”
The Netflix deal offers $23.25 a share in cash as well as stock in the streaming company and equity in the global networks spin-off that Paramount values at zero.
“We do not undertake any of these actions lightly,” David Ellison said. “Make no mistake, our goal remains to have constructive discussions with WBD’s board to reach an agreement that is in the best interests of WBD shareholders. Paramount is committed, my family is committed, and hopefully this helps answer the question of what comes next.”
Paramount argues that its $30-a-share cash offer, which includes buying global networks, is a better deal for WBD shareholders.
WBD’s board has twice told shareholders to reject the “inadequate” $108.4bn hostile takeover bid.
WBD called the bid the “largest LBO [leveraged buyout] in history”, a structure it said posed risks to the offer.
Under the terms of its deal with Netflix, WBD would have to pay a $2.8bn breakup fee if it walked away from the agreement.
Paramount Skydance’s revised offer also involved increasing its termination fee to $5.8bn, matching Netflix.
However, WBD said if it were to accept the deal with Paramount it would incur $4.7bn in costs, including the breakup fee to Netflix, additional interest on debt and a $1.5bn fee for failing to complete a debt exchange.
