Paramount Global has initiated legal action against Warner Bros. Discovery, challenging the method used to evaluate Netflix’s $45 billion acquisition bid. The lawsuit centers on allegations of flawed financial analysis and lack of transparency in determining bid superiority.
- Netflix's $45 billion bid was deemed superior by Warner Bros. Discovery's board
- Paramount's $38 billion offer was discounted by 23% due to perceived cash flow risks
- Paramount's model projects $5.2 billion in incremental enterprise value over five years
- Warner Bros. Discovery's model forecasts only $3.1 billion in value growth under Netflix's ownership
- Paramount has submitted 10 new director nominees in a proxy contest
- Stocks reacted with a 3.4% drop in Warner Bros. Discovery and a 2.1% gain in Paramount
Paramount Global has filed a lawsuit against Warner Bros. Discovery, disputing the board’s conclusion that Netflix's $45 billion offer for the company represents a superior proposal. The suit alleges that Warner Bros. Discovery’s financial modeling failed to account for potential synergies and long-term value creation, particularly in streaming and content licensing, which Paramount claims significantly devalue the Netflix proposal. The legal complaint highlights key discrepancies in the valuation methodology, including a 23% discount applied to Paramount’s $38 billion bid based on projected cash flow volatility, while Netflix’s offer was valued at a 9% premium despite similar risk factors. Regulatory filings show Paramount’s analysis projects a $5.2 billion increase in enterprise value over five years under its ownership, compared to a $3.1 billion gain under Netflix’s model. The dispute extends beyond numbers: Paramount is also pushing for a proxy fight, having submitted a slate of 10 new director nominees to replace current Warner Bros. Discovery board members, arguing that the current leadership is not acting in shareholders’ best interests. The company asserts that the board’s failure to engage in meaningful dialogue with Paramount undermines fiduciary obligations. Market reaction has been mixed. Warner Bros. Discovery’s stock dipped 3.4% on the news, while Paramount’s shares rose 2.1% as investors weighed the potential for a contested takeover. Analysts note that the outcome could set a precedent for how activist shareholders approach valuation disputes in media mergers.