A hostile takeover bid for media giant Warner Bros. Discovery (WBD) has intensified and entertainment conglomerate Paramount has taken legal action to force the release of financial data.
Paramount Skydance,
which owns film production company Paramount Pictures and TV network CBS, has filed a legal suit seeking to force WBD to tell shareholders how much it values Netflix’s bid and competing offers.
It has also threatened to nominate directors at the WBD annual meeting in an attempt to get board approval for its takeover.
Paramount’s bid was hostile because it involved direct contact with WBD’s shareholders. The board had already agreed to an $82.7 billion (£61.4 billion) deal with Netflix in early December to sell its TV studios and rights to top franchises, including Harry Potter and Game of Thrones.
The board of Warner Bros. Discovery unanimously recommended that shareholders accept Netflix’s offer to purchase the streaming portion of WBD’s business and Paramount reject Skydance’s offer.
David Allison, the chairman, chief executive of Paramount Skydance and son of billionaire Larry Ellison, said his company is seeking to release information about how WBD valued several elements of streaming as part of Netflix’s rival acquisition effort, Paramount Skydance’s own offer and WBD’s own valuation.
It is customary to make such disclosures The board reads an open letter to WBD shareholders when it recommends an investment.
The streaming wing of WBD’s business was already being spun off into a separate company that included units like TV network HBO and its streaming service HBO Max, as well as the TV and film production units of Warner Bros. and comic book filmmaker DC Studios.
But Mr Ellison said Paramount Skydance will propose a change to WBD bylaws that would require shareholder approval before spinning off the streaming portion, potentially creating hurdles in the sale process.
Other divisions of WBD include news channel CNN and sports network TNT.
What does Paramount Skydance want?
The hostile bidder is seeking engagement with the WBD board on its proposal, which it believes would be a “win-win for both companies.”. The Paramount Skydance offer is “simply higher” than Netflix’s, Mr Ellison said in the letter.
“We aimed for a collaborative negotiation and a successful transaction that would benefit both companies, shareholder groups, and all stakeholders,” Mr. Ellison stated in the letter.
“We are surprised WBD failed to respond to our December 4 proposal, clarify or negotiate its terms, or trade the contract markup with us.”
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The offer was rejected by Paramount because it said it involved an “extraordinary amount of debt financing” that represented a risk to the closing of any deal.
Any merger of WBD and Paramount Skydance or Netflix would be one of the largest media deals in history, with significant impacts on the potential future of TV, film production, and cinema.
Netflix has expressed doubt over the future of movie theatres, with films it produces playing short runs in theatres and some being released directly to streaming. Streaming giants owning film production companies could mean running fewer or shorter-term theaters for movies
If Paramount Skydance is successful in its takeover attempt, it would own CNN as well as CBS News, raising concerns about concentrating news services within a smaller number of companies.
WBD shares fell about 2%, while Paramount Skydance shares rose 0.5%.
What does WBD say?
Responding to the letter, WBD said, “Despite six weeks and multiple press releases from Paramount Skydance, it has yet to increase the price or address the many and obvious shortcomings of its proposal.
A spokesperson said, “Instead, Paramount Skydance is trying to distract attention with a meritless lawsuit and attacks on a board that has delivered unprecedented amounts of shareholder value.”
