As the high-stakes auction for Warner Bros. Discovery nears its end, Paramount is crying foul, alleging the process was tipped in favor of a competing bidder: Netflix.
In a scorching letter sent to Warner Bros. Discovery Chief Executive David Zaslav late Wednesday, Paramount’s lawyers accused Zaslav’s company of not playing fair.
“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,” an attorney for Paramount wrote.
The bidder is Netflix.
Early on, the Larry Ellison-family controlled Paramount appeared to have the best chance to win Warner Bros. Discovery. Paramount launched its campaign to buy the larger media company, which owns HBO and CNN, in September, one month after the Ellisons wrapped up their purchase of Paramount.
But Warner Bros. Discovery’s board rejected Paramount’s overtures, and opened the sale up to other bidders, allowing Netflix and Comcast, which owns NBCUniversal, to jump in.
People close to the process said recently the ground seemed to shift beneath Paramount, allowing Netflix, which has offered a largely cash bid, to gain an edge.
Initially, analysts felt that the Ellison family’s warm relations with President Trump almost certainly guaranteed that Paramount would ensure a quick and smooth regulatory approval. Trump weighed in, saying Paramount should win the prize, allowing the Ellisons to control CBS News as well as CNN.
However, the prospect of the Ellisons gaining such a huge swath of U.S. media did not sit well with foreign leaders wary of Trump, according to a person close to the auction who was not authorized to speak publicly.
Paramount’s letter cited a recent meeting that Warner international executive Gerhard Zeiler had in Brussels with European Commission members “to discuss the potential merger prospects” for Warner. E.U. Commission Vice President Henna Virkkunen attended the meeting.
During that meeting, “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,” according to Paramount’s letter, pointing to a report in a German newspaper about the meeting.
“The implications of such a meeting, if it occurred, are clear and evince a tacit resistance to, if not active sabotage of, a Paramount offer,” Paramount wrote.
Warner Bros. Discovery defended its conduct Thursday. Lawyers for the company responded to Paramount saying that, as requested, it had shared the letter with Warner board members.
“Please be assured that the WBD Board attends to its fiduciary obligations with the utmost care, and they have fully and robustly complied with them and will continue to do so,” the Warner lawyers wrote.
Paramount said other media reports have mentioned Warner Bros.’ “enthusiasm” for the prospect of Netflix prevailing in the bidding — to potentially create a streaming and traditional media behemoth.
Netflix did not comment on the letter from Paramount.
Paramount’s letter suggests the company will not go away quietly.
“We remain confident that the Paramount offer would provide the maximum value to WBD stockholders and look forward to the opportunity to continue to engage with you productively in this process,” Paramount’s attorneys wrote. “But at this point we must insist on assurances and steps taken to ensure that a truly fair and independent process is being conducted, both for Paramount’s benefit and in the interest of WBD’s stockholders.”
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