Paramount Skydance Corp., led by David Ellison, has escalated its acquisition effort against Warner Bros. Discovery Inc. by filing a lawsuit over the studio's $82.7 billion merger agreement with Netflix Inc. The legal action represents a significant intensification in one of Hollywood's most high-profile corporate battles.

Legal Challenge in Delaware Court

Paramount filed the lawsuit in Delaware Court of Chancery, specifically seeking disclosure of the financial analysis that Warner Bros' board used to justify its Netflix deal. The primary objective is to provide shareholders with essential information needed to evaluate Paramount's competing offer before the tender offer expires on January 21.

Beyond the lawsuit, Paramount plans to nominate directors to Warner Bros' board to directly challenge the Netflix merger and influence shareholder decisions. The company has also proposed an amendment to Warner Bros' bylaws that would require shareholder approval for any spinoff of the cable TV business, which represents a key component of the Netflix agreement.

Competing Financial Offers

The two competing bids present shareholders with distinctly different value propositions:

Paramount argues that its all-cash bid offers superior financial terms, easier valuation for shareholders, and greater likelihood of clearing regulatory scrutiny. In contrast, Warner Bros maintains that the Netflix deal provides strategic value, particularly through the potential Discovery cable TV spinoff, which Paramount dismisses as having minimal worth.

Board Response and Financial Implications

Warner Bros' board has rejected Paramount's latest offer, characterizing Paramount's arguments as "meritless" and noting that the company has not increased its bid or addressed identified deficiencies. The board has also highlighted significant financial consequences of abandoning the Netflix deal, including a $2.8 billion termination fee as part of $4.7 billion in total additional costs.

Paramount contends that Warner Bros has never demonstrated that the Netflix deal is financially superior to its offer, suggesting the dispute may ultimately be resolved through a shareholder vote.

Industry and Content Control Stakes

The outcome of this corporate battle will determine control over Warner Bros' valuable content library, including major franchises such as Harry Potter, DC Comics, and HBO assets. This decision could significantly reshape Hollywood's content landscape and streaming industry power dynamics.

Key Developments Summary

The critical elements of this corporate showdown include:

• Legal Action: Lawsuit filed for full financial disclosure to aid shareholder decision-making
• Superior Offer Claims: Paramount's $108.7 billion all-cash proposal versus Netflix's mixed cash-and-stock deal
• Board Challenge: Planned director nominations to influence Warner Bros' shareholder vote
• Bylaw Changes: Proposed amendments requiring shareholder approval for Discovery TV spinoff
• Decision Deadline: January 21 deadline for shareholders to determine control of major entertainment assets

Shareholders now face a critical decision that will determine the future ownership and strategic direction of one of Hollywood's most significant content portfolios.

Paramount Skydance Corp has escalated its hostile takeover battle for Warner Bros Discovery Inc, reaffirming a $30 per share cash offer while making the bold claim that the target company's cable television networks are essentially worthless. The entertainment giant insists its bid represents the superior path forward for shareholders compared to Netflix Inc's competing proposal.

Financial Terms and Backing

Paramount's aggressive stance centers on its comprehensive financing structure and valuation methodology. The company has addressed previous concerns by securing substantial financial backing for the transaction.

The deal structure includes an irrevocable personal guarantee from billionaire Larry Ellison for the $40.4 billion in equity financing, addressing what Paramount describes as "every issue raised" by Warner Bros management during the months-long negotiation process.

Cable Networks Valuation Dispute

The crux of Paramount's argument lies in its assessment of Warner Bros' traditional cable assets, including TNT and CNN. These networks have experienced significant viewer and advertiser exodus as consumers increasingly shift toward streaming platforms. Paramount's valuation methodology draws heavily from recent market performance of similar assets.

The company points to Versant Media Group Inc, the cable networks recently spun out of Comcast Corp, as a cautionary example. Versant's market debut proved disappointing, with shares declining approximately 30% in the initial trading days. Combined with the spinoff's $15.1 billion debt burden, Paramount argues this performance illustrates the "challenging path ahead" for traditional cable assets.

Competing Acquisition Structures

The two rival bids differ significantly in their approach to Warner Bros' diverse asset portfolio. Netflix's strategy involves acquiring only the studio and streaming operations, leaving shareholders with stock in a new entity called Discovery Global that would house the cable channels. Paramount characterizes this structure as problematic, valuing the Discovery Global shares at zero based on Versant's poor performance.

Warner Bros Response and Market Dynamics

Warner Bros Discovery has consistently rejected Paramount's advances, most recently on Wednesday, citing concerns about deal financing and execution risks. The company's board expressed skepticism about Paramount's ability to complete the transaction, despite the Ellison guarantee. Chairman Samuel DiPiazza noted that Paramount "didn't raise the price" and maintained that Netflix's offer remains superior.

The battle centers on control of one of Hollywood's most prestigious studios, home to major franchises including Batman and Harry Potter, plus the premium HBO network. David Ellison, Paramount's chief executive officer, emphasized the company's commitment to "engaging with shareholders on the merits of our superior bid" while advancing regulatory review processes.

Market Performance Impact

Paramount also argues that Netflix's offer has effectively decreased in value due to recent declines in the streaming company's stock price, since Netflix's proposal includes $4.50 per share in Netflix equity alongside $23.25 in cash. This market volatility adds another layer of complexity to shareholder decision-making in the ongoing acquisition battle.