Lawyers for Paramount Skydance sent a letter to Warner Bros. Discovery CEO David Zaslav, expressing “grave concerns” about the alleged unfairness of WBD sales process. The attorneys suggested the Warner Bros. Discovery board has “embarked on a myopic process with a predetermined outcome that favors a single bidder” — meaning Netflix.
The board Warner Bros. Discovery is reviewing second-round bids submitted Dec. 1 from Paramount Skydance (which is seeking to acquire the entire company in an all-cash deal) and Netflix and Comcast (which are bidding for just Warner Bros. streaming and studios).
“Paramount has a credible basis to believe that the sales process has been tainted by management conflicts, including certain members of management’s potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements,” the Dec. 3 letter from Paramount Skydance lawyers to Zaslav reads. The Paramount letter also alleged that “It has become increasingly clear, through media reporting and otherwise, that 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.”
The Paramount lawyers cited U.S. media reports about “the enthusiasm by WBD management for a transaction with Netflix, and on statements by management that a transaction between WBD and Netflix would be a ‘slam dunk,’ while also referring to Paramount’s bid in a negative light” and that WBD’s “board has really warmed to” a transaction with Netflix due to the “chemistry between” WBD management and Netflix management.
In a reply sent Thursday morning, Warner Bros. Discovery lawyers wrote to acknowledge receipt of the letter sent on behalf of Paramount Skydance. “We have shared the letter with the members of the Warner Bros. Discovery (‘WBD’) board of directors,” the WBD response letter said. “Please be assured that the WBD Board attends to its fiduciary obligations with the utmost care, and that they have fully and robustly complied with them and will continue to do so.”
In their letter, the lawyers for Paramount said the company “agreed to certain standstill arrangements in exchange for the opportunity to participate in a truly competitive and unbiased bidding process. Paramount did not bargain for WBD to foster, whether intentionally or unintentionally, a tilted and unfair process.”
The lawyers said they were seeking “confirmation as to whether WBD has appointed an independent special committee of disinterested members of its board to consider the potential transaction opportunities and to make a final determination regarding a sale or break-up of all or part of the company. If not, we strongly urge you to empower such a special committee comprised of directors with no potential appearance of bias or beholdenness to others whose interests may differ from those of the stockholders.”
The Paramount letter concluded, “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. 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.”
More to come
variety.com
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