Paramount files lawsuit against Warner Bros in bid to restart hostile acquisition

Paramount Takes Legal Action Against Warner Bros Over Takeover Bid

Paramount has initiated a lawsuit against Warner Bros in an attempt to revive its $108 billion (£80 billion) hostile takeover proposal for the major Hollywood studio.

David Ellison, Paramount’s chief executive, addressed Warner Bros shareholders in a letter, stating that the company is seeking a court order to obtain fundamental information he alleges was withheld from investors.

The requested disclosures include specifics on how Warner Bros assessed a separate $83 billion acquisition offer from Netflix, which was accepted last month, as well as the valuation process for its networks division, which encompasses CNN.

Paramount has petitioned a Delaware court to compel Warner Bros to release these details, arguing that shareholders need this information to make an informed decision regarding the Netflix transaction.

This lawsuit intensifies the ongoing dispute, following Warner Bros’ recent rejection of Paramount’s unsolicited bid.

Warner Bros executives maintained that Paramount’s offer did not serve shareholders’ best interests, even after Oracle founder Larry Ellison—David Ellison’s father—offered a $40 billion personal guarantee to support the deal.

This marks the second public dismissal of Paramount’s advances by Warner Bros, which has also privately turned down the Ellison family on multiple occasions. Warner Bros continues to view Netflix’s $83 billion proposal as more favorable.

In a further effort to block the Netflix agreement, Paramount announced plans to nominate a group of directors to Warner Bros’ board, aiming to rally opposition to the deal’s approval.

Additionally, Paramount intends to propose a change to Warner Bros’ by-laws, requiring shareholder consent before any spin-off of the networks division can proceed.

Both initiatives will be subject to shareholder votes, providing Paramount with additional leverage over Warner Bros’ leadership.

Details of the Hostile Takeover Attempt

According to the terms of the Netflix agreement, Warner Bros intends to first separate its networks division, including CNN, before proceeding. In contrast, Paramount’s offer targets the entire company.

David Ellison reiterated in his letter that Paramount remains dedicated to its takeover attempt, though he acknowledged that the final decision will likely rest with the shareholders.

If Paramount is unable to halt the transaction, Netflix’s acquisition will still face rigorous regulatory review, a process expected to take up to a year and a half.

Critics of the merger have voiced concerns about the potential consequences of merging two leading streaming platforms in the United States—Netflix and HBO Max.

Netflix has also been criticized for possibly reducing the number of films shown in theaters or shortening the duration of theatrical runs.

The streaming company has denied these allegations and stated that it is already cooperating with competition regulators in both the US and Europe.

Concerns Surrounding Paramount’s Offer

Paramount’s proposed acquisition has raised its own antitrust issues, as it would unite two of the largest film studios in Hollywood.

There has also been scrutiny regarding the financial backing of Paramount’s bid, which relies heavily on investments from the sovereign wealth funds of Saudi Arabia, Abu Dhabi, and Qatar.