Warner Bros. Discovery knocked Paramount’s effort to expedite the proceedings for its lawsuit in the Delaware Court of Chancery as an “exercise in urgency theatre —ringing a fire alarm in the absence of any flames or even smoke.”
David Ellison sued on Monday in an effort to obtain more information about how Warner Bros. Discovery’s board came to the conclusion that Netflix’s $83 billion deal for the company’s streaming and studio assets is superior to its $108.4 billion hostile takeover bid. It also asked that a judge expedite the proceedings ahead of the Jan. 21 expiration of Paramount’s tender offer.
“Paramount contends that an expedited trial is needed to compel WBD to disclose more because the board requests stockholder action, but it is Paramount—not WBD—that is asking stockholders to act now,” Warner said in a court filing on Wednesday. “Paramount has launched a hostile tender offer and set its own expiration date of January 21, yet Paramount has the unilateral and unfettered ability to extend that expiration, and it admits that this offer is neither its “best and final” nor even possible of closing any time this year. No other urgency is identified, and none exists.”
WBD has said that shareholders will vote on the Netflix deal in late spring or early summer. At that time, the company will file a merger proxy statement that will offer additional disclosures about the value the merger will offer, including the fairness opinions and work of its financial advisors.
“The board will welcome the opportunity to defend its actions on a prompt and fair schedule,” the company added. “But it makes no sense to set such a schedule now when there is more disclosure forthcoming and no action expected or required by stockholders in the near term.”
It warned that Paramount is a “would-be hostile acquirer seeking to use this Court as its backdoor into the boardroom to peer over the shoulders of directors during a live contest for control”
“This Court has long demonstrated its willingness to expedite proceedings and discovery for plaintiffs who need urgent relief, but it has not and should not allow such proceedings to be a tactical tool for a bidder to pay the lowest possible price (let alone one that has declined to raise its bid or even pay a break fee),” the company continued. “Disclosure claims are regularly resolved as a matter of law and require no discovery. So too here. Ordering discovery now, before all of the disclosures have even been made, risks unduly harming stockholder interests by giving an unwarranted advantage to one hostile bidder. Paramount’s motion is premature and should be deferred.”
Vice Chancellor Morgant T. Zurn has set a hearing on Thursday morning to consider Paramount’s motion to expedite.
Paramount’s $30 per share bid comprises $40.7 billion in equity, with Oracle co-founder Larry Ellison making an irrevocable personal guarantee towards $40.4 billion of that, and $55 billion in debt financing. WBD’s board says its latest bid continues to offer “significant costs, risks and uncertainties.”
Meanwhile, Netflix’s offer is $23.25 per share in cash and a target of $4.50 in stock, subject to a collar, plus any additional upside that may come from Discovery Global. As Netflix stock has fallen below the collar, the streamer is also considering shifting its offer to a simpler all-cash deal.
Paramount’s lawsuit accuses WBD of failing to disclose the valuation and debt of its Discovery Global as well as the mechanism for a “purchase price reduction” in the Netflix deal tied to the cable network spinoff’s debt. Ellison argues that Discovery Global’s equity value is between nothing and 50 cents per share. But Warner Bros. Discovery’s board disagrees, pegging it closer to $3 to $5 per share based on estimates from some Wall Street analysts.
Paramount says the “deficiencies” in its filings “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.”
The tender offer is set to expire Jan. 21 at 5 p.m. ET, barring no extension. As of Dec. 19, less than 400,000 WBD shares had been validly tendered.
