Paramount sues Warner Bros to find out details about its agreement with Netflix

Paramount Skydance raises the tone in its fight for Warner Bros and presents a lawsuit to demand more information about its agreement with Netflix as it continues to push its hostile bid to acquire the media and entertainment company. In a letter sent Monday to Warner shareholders, Paramount CEO David Ellison announced that a lawsuit has been filed in the Delaware Court of Chancery, asking the court to “order WBD to provide this information so that shareholders have what they need to make an informed decision about whether or not to accept our offer.”

The lawsuit comes less than a week after WBD’s board again recommended shareholders reject Paramount’s latest modified offer. Last month, Warner announced an agreement with Netflix for the sale of its studio and streaming business, in a transaction valued at approximately $72 billion in capital terms. After the pact with Netflix was made public, Paramount announced its hostile offer to take over Warner.

Paramount has long defended its $30 per share offer for all of Warner. is superior and carries less risk and cost. Ellison stated in his letter that he will challenge the agreement with Netflix, either at Warner’s regular annual meeting or at an extraordinary meeting called to approve the operation, if Warner decides to hold it. “We are committed to seeing our takeover bid through to the end”says the letter.

Warner plans to spin off its cable television channels, known as Discovery Global, at the end of this year, and has stated that the upside potential of that operation makes Netflix’s offer more attractive. Paramount, for its part, has said Discovery Global shares are virtually worthless and maintains that its all-cash offer is better for investors. Ellison accuses Warner of not having been transparent with him throughout the entire process. “While Paramount’s all-cash offer is easy to value, the board has shied away from its duty of disclosure regarding the complex cash and stock consideration it has recommended Netflix accept to shareholders,” according to Paramount’s lawsuit.

From Paramount they affirm that Warner did not provide shareholders with adequate information to enable them to make an informed decision when voting on the operation, according to the lawsuit filed in court. The company asked the court to order Warner and its board to correct “all misleading information” and provide data on the valuations of the Netflix deal, the advisory banks’ analyzes and details of how the board applied “risk adjustments” to reach its conclusion.

“The board – by failing to disclose basic, relevant valuation information that shareholders need to make informed investment decisions – has recommended shareholders reject Paramount’s offer in favor of Netflix’s, which is both financially inferior to Paramount’s offer and less likely to obtain regulatory approval and close,” according to the lawsuit.