In a dramatic corporate showdown, Paramount Skydance Corporation has launched a formal challenge against Warner Bros. Discovery (WBD), accusing the media giant of running an unfair and biased process for the sale of its assets. The company has expressed grave concerns that WBD's management is improperly favouring a rival bid from streaming behemoth Netflix.
Formal Letter Alleges Process Flaws
Attorneys representing Paramount Skydance have sent a strongly-worded letter to WBD's Chief Executive Officer, David Zaslav. The correspondence, which has been seen by CNBC, questions the "fairness and adequacy" of the bidding process that officially commenced in October. Paramount has demanded that this letter be shared with the full WBD board of directors for discussion.
The legal challenge comes in the wake of the second round of bids, which concluded recently. In this round, Paramount, Netflix, and Comcast all submitted enhanced offers to acquire either parts or the entirety of WBD's valuable assets. Sources familiar with the confidential proceedings indicate that all three suitors increased their bids from the initial round, with Netflix's proposal being predominantly cash-based.
Media Reports Spark Accusations of Bias
Paramount's letter cites multiple media reports as evidence of a tilted playing field. It references a specific article from the German publication Handelsblatt, which detailed a meeting in Brussels between WBD's International Business President, Gerhard Zeiler, and EU Commission Vice President Hena Virkkunen. The report suggested discussions revolved around concerns that a potential merger with Paramount could lead to "excessive media concentration," implying regulatory hurdles.
More damningly, Paramount points to several U.S. media outlets that have reported on WBD management's apparent enthusiasm for a deal with Netflix. These reports quote WBD insiders describing a Netflix transaction as a "slam dunk" while casting Paramount's bid in a negative light. Post the December 1 revised bid submission, further reporting indicated the WBD board had "really warmed to" a Netflix deal due to strong chemistry between the two management teams.
Calls for an Independent Committee and Underlying Conflicts
Beyond media perceptions, Paramount alleges deeper issues are tainting the sale. The company states it has a credible basis to believe the process is compromised by management conflicts. These potential conflicts include certain executives' personal interests in post-transaction roles and compensation, linked to recent amendments in their employment agreements.
In light of these "grave concerns regarding the integrity" of the process, Paramount is seeking immediate confirmation on whether WBD has appointed an independent special committee of disinterested board members to oversee the transaction. If such a committee does not exist, Paramount strongly urges WBD to create one to ensure a fair and unbiased outcome that maximizes value for all stockholders.
Paramount concluded the letter by reaffirming its belief in the enormous potential of a combination with WBD and its confidence that its offer provides maximum value. However, it insists on concrete assurances and steps to guarantee a truly fair and independent process moving forward, for the benefit of both Paramount and WBD's shareholders.
