Paramount just turned its hostile pursuit of Warner Bros. Discovery (WBD) into a full‑blown legal brawl.
The company has filed suit in Delaware Chancery Court, aiming straight at WBD’s agreement to sell its streaming and movie businesses to Netflix for $82.7 billion.
At the same time, Paramount is still trying to convince WBD’s shareholders that its own $108.4 billion takeover offer is the better way out.
Netflix on one side, a hostile bid on the other
In December, WBD agreed to sell its streaming and movie operations to Netflix in a deal valued at $82.7 billion. Under that structure:
- WBD’s streaming and studio assets would go to Netflix.
- WBD’s legacy cable networks would be spun off into a separate company called Discovery Global.
Paramount, backed by Skydance, has been circling WBD for at least two years. In December it went fully hostile, putting forward an all‑cash bid for all of WBD worth $108.4 billion, or $30 per share.
Netflix’s offer works out to $27.72 per WBD share, according to WBD’s numbers, made up of:
- $23.25 in cash, plus
- Netflix common stock for the rest.
Paramount’s pitch to investors is simple: more cash per share and control of the entire company, not a break‑up.
The lawsuit: “It just doesn’t add up”
On January 12, Paramount CEO David Ellison sent a letter to WBD shareholders laying out the lawsuit and turning up the pressure ahead of a January 21 deadline for investors to tender their WBD shares into Paramount’s offer.
The suit asks the Delaware court to force WBD to open its books around the Netflix transaction, including:
- How WBD valued the Global Networks stub equity.
- How it valued the overall Netflix transaction.
- How the purchase price reduction for debt works in the Netflix deal.
- The basis for WBD’s “risk adjustment” to Paramount’s $30‑per‑share bid.
Ellison argued WBD never really engaged with Paramount’s proposal:
“We remain perplexed that WBD never responded to our December 4th offer, never attempted to clarify or negotiate any of the terms in that proposal, nor traded markups of contracts with us.”
He also questioned the board’s process and the lack of detailed financial disclosure:
“It just doesn’t add up – much like the math on how WBD continues to favor taking less than our $30 per share all-cash offer for its shareholders.”
Paramount clearly hopes that court‑ordered disclosures will shake loose more support from WBD’s investor base.
Governance offensive: board seats and bylaw changes
Paramount isn’t stopping at litigation.
Ellison’s letter says the company will:
- Nominate directors to WBD’s board at the next annual shareholder meeting, with a mandate to fight the Netflix transaction, and
- Propose bylaw changes that would require WBD shareholders to approve any spinoff of WBD’s cable channels.
The nomination window opens in three weeks, giving Paramount another lever to push against the Netflix deal and the current WBD board.
WBD: lawsuit is “meritless,” price still not good enough
WBD’s response, issued to Deadline, was blunt.
The company called the suit “meritless” and said Paramount is dodging the core problem: price and financing.
WBD said that after six weeks and multiple public blasts from Paramount Skydance, the bidder has:
- Not raised its offer price, and
- Not fixed what WBD calls the “numerous and obvious deficiencies” in the proposal.
The WBD board last formally rejected Paramount’s offer on January 7. At that point, directors highlighted several red flags:
- Paramount would need an “extraordinary amount of debt financing.”
- Paramount carries a junk credit rating and negative free cash flows.
- Netflix, by contrast, has an A/A3 credit rating and is estimated to generate over $12 billion in free cash flow this year.
- WBD calculates that Paramount’s structure would saddle the combined company with $87 billion in debt.
- Paramount’s bid, according to WBD, doesn’t fully cover hefty breakup fees if the deal collapses.
Board chair Samuel Di Piazza Jr. has been public about the gap. On CNBC’s Squawk Box on January 7, he said Paramount still hasn’t put up a clearly better deal:
“From our perspective, they’ve got to put something on the table that is compelling and is superior.”
WBD has also signaled it thinks the company might get more value by selling its cable assets separately from its studios and HBO Max business, rather than bundling everything into a single sale to Paramount.
Larry Ellison steps in with a $40.4 billion backstop
Paramount has tried to answer the financing doubts by bringing in serious family money.
Larry Ellison—Oracle co‑founder, CTO, and one of the world’s richest people—has provided an irrevocable personal guarantee for $40.4 billion of the equity needed for Paramount’s bid, according to the company.
In his letter, David Ellison leaned on that support, writing that:
“Paramount is committed, my family is committed, and hopefully this helps answer the question of what comes next.”
Even with that guarantee, WBD keeps returning to the same question: is Paramount willing to pay more and materially de‑risk the structure versus the Netflix deal?
Shareholders split, regulators waiting
WBD’s own investors are not speaking with one voice.
Some large shareholders have recently said they prefer Paramount’s offer or are at least open to further negotiation with Ellison’s group. Others have backed the Netflix transaction and the board’s process.
Both potential deals—Netflix’s asset purchase and Paramount’s full takeover—would need regulatory sign‑off and could take 12 to 18 months to close. Netflix has already begun working with regulators to advance its acquisition.
That timing risk is another wild card for WBD’s board, which is now weighing:
- A signed deal with Netflix that restructures the company and spins off cable, versus
- A hostile, higher‑headline‑value bid from Paramount that would scrap the spinoff and significantly change WBD’s capital structure.
What’s clear is that Paramount isn’t backing down. It’s gone to court, it’s coming for board seats, and it’s betting that more disclosure—and possibly more shareholder agitation—can still derail Netflix’s $82.7 billion path into WBD’s streaming and studio empire.
