The takeover battle for Warner Bros Discovery has taken a dramatic legal turn after Paramount Skydance filed a lawsuit seeking to force the media giant to disclose key details of its proposed deal with Netflix. The legal action, combined with Paramount’s plan to challenge the existing board of directors, marks a major escalation in one of Hollywood’s most closely watched corporate battles.
On Monday, Paramount Skydance, led by David Ellison, announced that it had filed suit in Delaware’s Court of Chancery against Warner Bros Discovery, its chief executive David Zaslav, and influential investor John Malone. The lawsuit seeks to compel Warner Bros Discovery to disclose the financial analysis behind its board’s support for an $82.7 billion deal with Netflix, which Paramount argues is inferior to its own offer.
Paramount and Netflix are locked in an intense contest for control of Warner Bros Discovery and its prized film and television assets. These include some of the most valuable and recognisable franchises in the global entertainment industry, such as the Harry Potter series and the DC Comics universe, alongside a vast content library built over decades of film and television production.
Paramount maintains that Warner Bros Discovery’s board has failed to provide shareholders with sufficient transparency about why it favours the Netflix proposal over Paramount’s all-cash offer. Paramount is proposing to acquire the entire company for about $108.7 billion, equivalent to $30 per share. In contrast, Netflix’s offer values only the studio and streaming assets at $27.75 per share and includes a combination of cash and stock.
Warner Bros Discovery rejected Paramount’s latest proposal last week and advised shareholders to vote in favour of the Netflix transaction. That rejection prompted Paramount to significantly escalate its campaign. Beyond filing the lawsuit, the company announced plans to nominate its own slate of directors to Warner Bros Discovery’s board, a move aimed at directly challenging the leadership’s strategic direction.
In a letter addressed to investors, Paramount also said it would propose changes to Warner Bros Discovery’s bylaws. One of the key amendments would require shareholder approval for any future separation of the company’s cable television business. The proposed cable spinoff is a central component of the Netflix transaction and has been a major point of contention in the takeover battle.
Paramount has been highly critical of the planned cable separation, arguing that the asset has minimal value and weakens the overall deal structure. The company claims its all-cash bid provides greater certainty, simplicity, and long-term value for shareholders, while also being more likely to clear regulatory hurdles.
The lawsuit filed in Delaware seeks to force Warner Bros Discovery to fully disclose the financial evaluations and reasoning used by its board to justify backing the Netflix merger. Paramount argues that without access to this information, shareholders cannot make an informed decision about whether to tender their shares under the current offer.
Timing is a critical factor in the dispute. Paramount’s offer is set to expire on January 21, although it may be extended depending on shareholder response. The company stressed that decisions on any extension would be influenced by how many shares are tendered before the deadline.
With the legal action now underway, Paramount has raised the stakes but has not increased its bid. The company insists that its existing offer is already superior and does not require a higher price to win shareholder support. It has also argued that its proposal faces fewer regulatory risks compared to the Netflix deal, given concerns about market concentration in the global streaming industry.
Financing for Paramount’s bid includes $40 billion in equity personally guaranteed by Larry Ellison, father of Paramount CEO David Ellison, along with $54 billion in debt. Paramount has repeatedly cited this financing structure as evidence of the strength and credibility of its offer.
In a strongly worded statement, Paramount accused Warner Bros Discovery of avoiding engagement. The company said the board has offered “increasingly novel reasons” for rejecting its proposal but has failed to demonstrate that the Netflix transaction is financially superior. Paramount added that unless the board decides to formally engage, the final decision will rest with shareholders.
Some market analysts remain sceptical about the impact of the lawsuit. Craig Huber of Huber Research Partners suggested that legal proceedings could take a long time to resolve and may not significantly influence the immediate outcome. He argued that if Paramount is determined to secure the deal, increasing the bid price may be the most effective strategy.
Warner Bros Discovery dismissed the lawsuit as meritless, stating that Paramount has not addressed what it described as the “numerous and obvious deficiencies” in its proposal. The company also noted that Paramount has failed to improve its offer despite repeated rejections.
Another major factor influencing the board’s position is the cost of abandoning the Netflix agreement. Warner Bros Discovery has disclosed that it would owe Netflix a termination fee of $2.8 billion if it exited the deal, with total associated costs estimated at about $4.7 billion. These financial penalties add further complexity to the decision-making process.
Netflix has not issued a public response to the lawsuit or Paramount’s renewed campaign. The streaming giant has been aggressively expanding its content portfolio and views the Warner Bros Discovery assets as a strategic opportunity to strengthen its competitive position in the global entertainment market.
Investor reaction to the latest developments was mixed. Warner Bros Discovery shares fell 1.6 percent on Monday, reflecting uncertainty around the takeover process. Netflix shares were largely unchanged, while Paramount’s stock rose by 0.4 percent.
As the battle unfolds, the outcome is expected to have far-reaching implications for the future of Hollywood. The consolidation of major studios and streaming platforms continues to reshape how content is produced, distributed, and consumed worldwide. Whether Warner Bros Discovery ultimately aligns with Netflix or Paramount, the decision will play a significant role in defining the next phase of the global media and entertainment industry.
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