Paramount Sues Warner Bros. in Takeover Battle
Vital Skydance filed a lawsuit against Warner Bros. Discovery (WBD) in Delaware Chancery Court today. This legal maneuver accompanies a hostile takeover attempt as Vital seeks to derail WBD’s existing merger agreement with Netflix. The conflict stems from WBD’s decision to reject Vital Skydance’s $108.4 billion all-cash bid in favor of a $82.7 billion cash-and-stock deal with Netflix. Vital CEO David Ellison argues that the WBD board is “misleading” its shareholders by favoring an inferior offer.
“We filed suit this morning in Delaware Chancery Court to ask the court to simply direct WBD to provide this information so that WBD shareholders have what they need to be able to make an informed decision as to whether to tender their shares into our offer,” said Ellison in a letter Filed in the Delaware Chancery Court, the lawsuit aims to force WBD to provide transparency regarding: Valuation Discrepancies: How WBD valued the “Global Networks” stub equity and the overall Netflix transaction. Risk Adjustments: The basis for WBD’s “risk adjustment” of Vital’s $30-per-share all-cash offer. Debt Mechanics: Details on how purchase price reductions for debt function within the Netflix deal.
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“WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its ‘risk adjustment’ of our $30 per share all-cash offer,” said David Ellison said in the letter on Monday.
Proxy Battle and Corporate Structure
Vital Skydance is launching a proxy battle to seize control of the WBD board. It intends to nominate a slate of its own directors to WBD’s board at the next annual meeting. These directors would be tasked with reconsidering Vital’s offer under their fiduciary duties. Furthermore, Vital is proposing an amendment that would require shareholder approval for any separation of WBD’s “Global Networks” (a key component of the Netflix deal).
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The primary difference between the two offers lies in scope and structure. The Netflix offer is a “friendly,” board-approved deal valued at approximately $72 billion (about $27.75 per share) and is a mix of cash and stock. Crucially, Netflix does not want the whole company; it is cherry-picking the “crown jewels,” specifically the Warner Bros. movie studios and HBO/Max, while leaving the “Global Networks” (like CNN, TNT, and Discovery) to be spun off or sold separately. In contrast, the Vital Skydance bid is a “hostile” all-cash tender offer valued at $108.4 billion ($30 per share). Vital is bidding for 100% of WBD, including its debt and its struggling linear cable networks.
WBD Board Rejected Vital’s Offer Despite Vital’s (PSKY) offer appearing more lucrative on paper ($30/share vs. $27.75/share), WBD’s board has categorized the Vital bid as “inadequate” and “risky.” In its release, WBD said, “The PSKY Offer Is Not Superior, or Even Comparable, to the Netflix Merger.” In its letter to shareholders, WBD said, “PSKY has repeatedly failed to submit the best proposal for WBD shareholders despite clear direction from WBD on both the deficiencies and potential solutions.” The release added, “The WBD Board, management team, and our advisors have extensively engaged with PSKY representatives and provided it with explicit instructions on how to improve each of its offers. Yet PSKY has continued to submit offers that still include many of the deficiencies we previously repeatedly identified to PSKY, none of which are present in the Netflix merger agreement, all while asserting that its offers do not represent its ‘best and final’ proposal.”
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WBD Expressed Concern Over
