A Delaware Chancery Court judge ruled today that Paramount has not identified any “irreparable harm” to itself as a Warner Bros. Discovery shareholder that would justify expedited disclosure as it pursues a hostile tender offer for the media giant.
“Paramount as a stockholder must suffer cognizable, irreparable harm. It has not identified any,” Chancellor Morgant T. Zurn said from the bench at the conclusion of a hearing this morning.
In a statement after the decision, Paramount said the ruling “was based on Paramount’s standing and does not pertain to the merits of Paramount’s claim.”
In a dueling statement, WBD said “the lawsuit by Paramount Skydance was yet another unserious attempt to distract and the Judge saw right through it.”
Paramount sued for expedited disclosure from WBD related to the board’s recommendation to shareholders not to tender their stock to Paramount. The David Ellison company insisted on urgency given a Jan. 21 deadline — set by Paramount itself — for stockholders to tender their shares as it seeks to derail WBD’s agreement with Netflix.
The tender deadline was extended once and Paramount’s counsel acknowledged at the hearing today that it will be extended again but did not note the new date. The tender is not binding right now.
Specifically, Paramount wants details concerning the valuation of the Discovery Global spinoff, which it says is key information shareholders need to decide which offer is better and whether to tender their shares.
Warner said it will be providing more robust disclosure in its upcoming Netflix merger proxy statement and that Paramount does not get to set that timeline.
The legal issue, clarified Chancellor Zurn, is whether Paramount itself, specifically as a Warner Bros. Discovery shareholder, would suffer harm if disclosures are not expedited.
“Paramount itself is not making any decision based” on Warner Bros. Discovery disclosures, the judge said. “Paramount itself was not misled.” Paramount has other means to obtain the information besides an expedited proceeding and “must decide whether and how to improve its odds of success.”
Paramount’s statement said “WBD shareholders need the information on the WBD Board’s evaluation of the Global Networks stub equity and the “risk adjustments” performed on Paramount’s offer to make an informed decision. WBD shareholders should ask why their Board is working so hard to hide this information. Paramount continues to urge WBD to make these disclosures so that WBD shareholders can make an informed decision.”
Said WBD: “We are pleased a Delaware Court agreed with our belief and rejected the notion that this lawsuit needed special treatment and may have other serious flaws. Despite its multiple opportunities, Paramount Skydance continues to propose a transaction that our board unanimously concluded is not superior to the merger agreement with Netflix.”
During the hearing, WBD attorney Ryan McLeod Of Watchtell Lipton argued that Paramount “seeks the court’s help to win control of Warner Bros. Discovery, which Paramount had every opportunity to do during a very lengthy sales process. Paramount had more time than any other bidder, during which time Paramount received more feedback than any other bidder. Paramount’s harm is risk that Warner Bros. Discovery shareholders will not tender their shares immediately for a deal that may not close for 18 months.”
“The value of Global Networks is the delta between the two transactions,” countered Paramount attorney Michael Barlow of Quinn Emanuel. “Our goal is to get more information to the stockholders as quickly as possible.” He said Para “fully intends to extend the tender offer. We stand fully behind it.” But, meanwhile, the WBD board should not be allowed “to extend a breach of fiduciary duty.”
Alongside its foray into Delaware court, Paramount plans to propose an alternate slate of directors for a vote at WBD’s annual meeting, meaning a proxy fight. The window to start that process opens in about three weeks.
Paramount is offering $30 a share in cash for all of WBD. The Netflix deal is a mix of $23.25 a share in cash and $4.50 in Netflix stock for the plum studios and streaming assets. Linear television would be spun off to WBD shareholders as a new publicly traded company, Discovery Global.
Netflix is considering shifting its offer to all-cash.
