Paramount is calling foul in the Warner Bros. Discovery sale process, accusing the company of running an unfair process that it thinks might favor Netflix.
“It has become increasingly clear, through media reporting and otherwise, that WBD appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders, and embarked on a myopic process with a predetermined outcome that favors a single bidder. We specifically request and expect this letter will be shared and discussed with the full board of directors of WBD,” the David Ellison company wrote in a letter to WBD CEO David Zaslav.
“Please be assured that the WBD Board attends to its fiduciary obligations with the utmost care, and that they have fully and robustly complied with them and will continue to do so,” said WBD attorneys in response. They said the letter has been shared with the full board of directors.
Paramount, Netflix and Comcast have made offers for all or part of WBD in a sale process that kicked off in October. Second round bids came in this week. The WBD board formally put itself on the block to open the process to other bidders after receiving three consecutive offers from newly merged Paramount Skydance.
Paramount’s missive cited press reports that WBD management was warming to a Netflix offer. “We have come to you first to inquire whether this reporting is accurate, and to engage in a productive discussion with you around any actual or perceived issues that it may reflect.”
The company also accused WBD management of conflict of interest. It did not name names but Paramount had offered Zaslav a role at a combined company in one of its previous offers.
“Paramount has a credible basis to believe that the sales process has been tainted by management conflicts, including certain members of management’s potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements. These concerns are amplified by indications of director bias and beholdenness to others whose interests may not align with the stockholders’, and the fact that alternatives involving only certain WBD assets are being prioritized notwithstanding their heightened regulatory risk and potential to deprive stockholders of consideration for the entirety of WBD’s enterprise value,” reads the letter.
Paramount said it had “agreed to certain standstill arrangements in exchange for the opportunity to participate in a truly competitive and unbiased bidding process. Paramount did not bargain for WBD to foster, whether intentionally or unintentionally, a tilted and unfair process.”
It asked WBD to appoint “an independent special committee of disinterested members of its board to consider the potential transaction opportunities and to make a final determination regarding a sale or break-up.”
WBD had been in the process of splitting the company in two with its global linear networks housed under one roof and HBO Max and Warner Bros. Studios another. It would be on track to complete the separation by mid-2026 absent a sale. Paramount is bidding for the entire company. Netflix and Comcast have made offers for studios and streaming. WBD had hoped to reach an agreement by the end of December.
Paramount said it is confident that its offer “would provide the maximum value to WBD stockholders.”
There’s been chatter around possible antitrust blowback in a Netflix-HBO Max combination given its dominance in streaming, Rep. Darrell Issa (R-CA) sent a letter to regulators last month warning against a Netflix-WBD deal.
Paramount also noted a report in German newspaper Handelsblatt about a meeting in Brussels between WBD international chief Gerhard Zieler with EU Commission Vice President Hena Virkkunen. “In that conversation, the article reports that ‘concerns were raised that the Ellison family’s planned acquisition of Warner Bros. Discovery could lead to excessive media concentration’ and that the E.U. Commission would consider intervening in a potential merger with Paramount for this reason.” Par said in its letter the meeting as reported implied “a tacit resistance to, if not active sabotage of, a Paramount offer.”
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