A Delaware judge has dismissed Paramount’s motion to expedite a lawsuit against Warner Bros. Discovery seeking more information about its $83 billion Netflix deal.
Paramount CEO David Ellison, who is seeking to thwart Netflix with a $108.4 billion tender offer, has accused WBD’s board of withholding key information about how it valued the streamer’s deal and the proposed cable network spinoff Discovery Global, which it says “deprive stockholders of the ability to evaluate the real risk of a decrease in financial consideration or meaningfully compare Netflix’s offer to Paramount’s all-cash offer.”
On Thursday, Delaware Chancery Court judge Morgan T. Zurn ruled that Paramount failed to demonstrate it would suffer irreparable harm, noting that the media giant can’t be harmed as a shareholder because it’s not making a decision on its own tender offer and was not misled itself.
“Paramount as a stockholder must suffer cognizable, irreparable harm. It has not identified any,” Zurn said.
Zurn added that Paramount has other ways of obtaining the information it seeks without an expedited proceeding and “must decide whether and how to improve its odds of success.”
The ruling comes after WBD slammed Paramount’s move in a court filing on Wednesday, arguing it was an “exercise in urgency theatre — ringing a fire alarm in the absence of any flames or even smoke.” It also has asked that the “meritless” lawsuit be deferred until after it provides additional disclosures in the Netflix merger’s proxy statement.
“Today’s lawsuit by Paramount Skydance was yet another unserious attempt to distract and the Judge saw right through it. 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,” a Warner Bros. Discovery spokesperson said in a statement. “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.”
Paramount said that Thursday’s ruling was based on the company’s standing and does not pertain to the merits of its claim.
“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,” Paramount’s statement continued. “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.”
As of Dec. 19, less than 400,000 WBD shares had been validly tendered to Paramount Skydance. The company had already extended the tender offer deadline to Jan. 21 at 5 p.m. ET and Paramount’s counsel indicated at Thursday’s hearing that it would do so again, but did not reveal a new date.
In addition to the lawsuit, Ellison is threatening a proxy battle aimed at replacing WBD’s board of directors with its own slate of candidates to engage further with its offer. Paramount would also propose an amendment to Warner’s bylaws that would require shareholder approval of the Discovery Global spinoff.
Warner Bros. Discovery has not yet set a date for its 2026 annual meeting, though board chairman Samuel DiPiazza Jr. has said shareholders would vote on the Netflix deal in late spring or early summer. However, a threshold of just 20% of WBD shareholders who have held the stock for at least a year would be needed to call a special meeting before then.
Paramount’s $30 per share bid is backed by Oracle co-founder Larry Ellison’s irrevocable personal guarantee towards $40.4 billion of the equity financing, and $55 billion in debt financing from Bank of America, Citigroup and Apollo Global Management. Its other equity partners include RedBird Capital Partners and three Middle Eastern sovereign wealth funds.
Meanwhile, Netflix’s offer is $23.25 per share in cash and a target of $4.50 in stock, subject to a collar. As Netflix stock has fallen below the collar, the streamer is also considering shifting its offer to a simpler all-cash deal.
Netflix shares were up 0.85% on Thursday following the ruling, while Paramount shares fell 0.5%.
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