Paramount's Legal Bid Against Warner Bros. Discovery Rejected

A Delaware judge has dealt a significant blow to David Ellison's Paramount Skydance in its ongoing legal battle with Warner Bros. Discovery. The ruling denies Paramount's request for a court order that would have forced WBD to quickly release information about how it values its cable TV networks.

The value of these networks is a central point of contention in the rival bids from Paramount and Netflix. While Paramount wants to acquire WBD's cable channels, Netflix does not, making the valuation a critical factor for WBD shareholders deciding between the two offers.

The Delaware Court of Chancery ruled against Paramount's motion for a summary judgment seeking expedited discovery. Judge Morgan Zurn determined that Paramount had not met the necessary legal standard for such an urgent request.

In her ruling, Judge Zurn stated, "Paramount has not shown it will suffer cognizable irreparable harm if expedition is not granted." This finding was central to the court's decision to deny Paramount's motion.

"Paramount as a stockholder was not misled by any omissions" from WBD, since Ellison's company wasn't deciding whether to take its own offer.

The judge's reasoning indicated that Paramount's legal standing did not warrant the special treatment it was seeking from the court, as the company was not in a position where it needed to make an immediate decision based on the undisclosed information.

The legal dispute stems from a larger corporate takeover battle. Paramount has made eight offers to buy Warner Bros. Discovery, all of which have been rejected by WBD's board of directors in favor of a competing deal with Netflix.

Paramount's latest offer is an all-cash bid of $30 per share for all of WBD, which includes its valuable cable networks like CNN. In contrast, Netflix's bid is a cash-and-stock offer of $27.75 per share for WBD's studio and HBO assets, but notably excludes the cable networks.

• Paramount's bid: $30 per share (all-cash, includes cable networks)
• Netflix's bid: $27.75 per share (cash-and-stock, excludes cable networks)
• WBD's board has rejected eight Paramount offers

This structure means the valuation of WBD's cable TV networks is a crucial variable for shareholders to understand the true value of each competing proposal.

During the proceedings, legal teams from both sides presented starkly different arguments regarding the urgency of the situation. Mike Barlow, a lawyer from Quinn Emanuel representing Paramount, argued that WBD shareholders were being actively harmed by the lack of information.

"For stockholders to understand the difference between those two transactions, they need certain basic information that they don't have today."

Barlow contended that WBD's shareholders "are being harmed" every day they lack WBD's valuation of its TV networks. Paramount's team also pointed to its January 21 deadline for shareholders to tender their shares, suggesting a time-sensitive need for the information.

Conversely, WBD's legal team, led by Ryan McLeod from Wachtell, Lipton, Rosen & Katz, dismissed the urgency. McLeod argued there was "zero emergency" to disclose the valuation and "no threat" of irreparable harm to Paramount. He characterized the January 21 deadline as an arbitrary date that could easily be extended, a point Paramount's lawyer confirmed by stating the company "fully intends to extend this tender offer."

Following the ruling, both companies issued statements reflecting their positions on the outcome. A Paramount spokesperson maintained that the core issue remains unresolved, emphasizing the need for transparency for WBD's investors.

"Paramount continues to urge WBD to make these disclosures so that WBD shareholders can make an informed decision."

On the other side, Warner Bros. Discovery expressed satisfaction with the court's decision. A company statement noted that WBD was pleased the court "rejected the notion that this lawsuit needed special treatment and may have other serious flaws."

The ruling allows WBD to continue its planned merger discussions with Netflix without the immediate pressure of a court-ordered disclosure of its cable network valuations. The legal and corporate maneuvering between the two media giants is expected to continue as the deadline for shareholder decisions approaches.

This legal setback represents another hurdle in David Ellison's ambitious pursuit of Warner Bros. Discovery. While the court's decision does not end Paramount's takeover attempt, it removes a key legal tool the company hoped to use to gain leverage in the negotiations.

The focus now shifts back to the boardroom and the shareholders. With the valuation of the cable networks remaining a closely guarded secret by WBD, investors must weigh the all-cash Paramount offer against the Netflix deal without full visibility on a critical asset. The outcome of this high-stakes corporate drama will likely depend on whether WBD shareholders are willing to proceed with the Netflix deal or hold out for a potential revised offer from Paramount.