Warner Bros. Discovery (WBD) has firmly rejected a lawsuit filed by Paramount Skydance, describing it as "meritless" and a tactic to "distract" investors from Paramount's ongoing, but ultimately unsuccessful, attempts to acquire WBD. Paramount Skydance, led by chairman and CEO David Ellison, initiated a hostile takeover bid for WBD, which has been met with consistent rejection from WBD's board of directors. Despite Paramount's persistent campaign, including six weeks of press releases, WBD stated that Paramount has failed to increase its $30/share all-cash offer or address its inherent deficiencies.

The legal action, filed by Paramount in Delaware Chancery Court on Monday, January 12th, names WBD CEO David Zaslav and other board members as defendants. Paramount is seeking to compel WBD to disclose detailed financial information regarding its $83 billion deal with Netflix. Specifically, Paramount demands transparency on how WBD valued its Discovery Global assets within the Netflix transaction, including the amount of debt WBD intends to offload to Discovery Global. Paramount argues that these details are crucial for shareholders to make an informed decision when comparing Netflix's deal against Paramount's offer. According to Paramount's analysis from January 8th, the Netflix transaction's total value to WBD shareholders stands at $27.42/share, suggesting that shares in the proposed Discovery Global spin-off would hold zero value under the Netflix agreement.

WBD's board had previously evaluated offers from Paramount, Comcast, and Netflix before unanimously choosing Netflix. The agreement with Netflix involves a payment of $27.75/share in cash and stock for Warner Bros.'s film and TV studios, HBO and HBO Max, and its games division. This transaction is slated for completion after WBD's spin-off of Discovery Global in the third quarter of 2026. Discovery Global is set to comprise assets such as CNN, TBS, HGTV, Food Network, and Discovery+.

In addition to the lawsuit, Paramount Skydance formally announced plans for a proxy fight. The company intends to nominate a rival slate of directors for election at the 2026 Warner Bros. Discovery shareholders meeting. These proposed directors, according to Paramount, would be committed to exercising WBD's right under the Netflix Agreement to engage with Paramount's offer. Paramount also plans to propose an amendment to WBD's bylaws that would require shareholder approval for any separation of Global Networks. Furthermore, if WBD calls a special meeting to vote on the Netflix agreement before its annual meeting, Paramount declared it would solicit proxies against such approval.

David Ellison has openly stated that WBD's board has breached its disclosure duties by withholding essential information, asserting that the board's conduct raises "serious concerns." He expressed perplexity that WBD never responded to Paramount's December 4th offer, nor attempted to clarify or negotiate its terms. Ellison maintains that the Netflix transaction is not financially superior to Paramount's offer, despite WBD's board unanimously concluding the opposite. WBD, in turn, reiterated that Paramount "has yet to raise the price" of its acquisition offer, underscoring the perceived inadequacy of Paramount's proposal.