David Ellison's Paramount is now suing Warner Bros. Discovery. Here's why.

• Paramount Skydance is taking its fight with Warner Bros. Discovery's board to court.
• Instead of raising its bid, Paramount is starting a proxy fight while trying to win over investors.
• Read Paramount Skydance CEO David Ellison's latest letter to WBD shareholders.

David Ellison has chosen to continue the fight for control of Warner Bros. Discovery, this time in court.

The Paramount Skydance CEO has made eight attempts to buy WBD, all of which have been rebuffed. That includes his most recent $30-per-share bid, which was spurned in favor of Netflix's offer. Paramount is attempting to acquire the entire company, including its TV networks, such as CNN, TBS, and TNT. Netflix's cash-and-stock offer is $27.75 per share for just WBD's studio and streaming assets.

Now, Paramount is suing WBD for more information, including how it's valuing its cable networks, "so that WBD shareholders have what they need to be able to make an informed decision as to whether to tender their shares into our offer," Ellison said in a letter to WBD shareholders on Monday morning.

If WBD's Global Networks business — the division that houses its cable TV networks — is worth substantially less than $2.25 per share, then Paramount's $30-per-share bid could look more attractive to shareholders than Netflix's proposal. Paramount has argued that WBD's cable channels have a $0-per-share equity value, implying they're worth about as much as the estimated $15 billion in debt that WBD intends to saddle them with.

"WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its 'risk adjustment' of our $30 per share all-cash offer," Ellison wrote to WBD investors.

Paramount is also initiating a so-called proxy fight where it tries to get representatives on WBD's board of directors.

For now, Paramount isn't raising the price of its bid. Instead, it is sticking with its all-cash, $30-per-share proposal in hopes that WBD shareholders will see something the board doesn't.

"WBD has provided increasingly novel reasons for avoiding a transaction with Paramount," Ellison wrote. "But what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer."

Paramount appears to be set on finding ways it can win control of WBD without paying more money in a renewed bidding war.

"Paramount will continue to use all avenues to wrestle WBD away from Netflix," said Ross Benes, an analyst at EMARKETER, Business Insider's sister company. "Lawsuits, shareholder appeals, proxy battles, and so on, individually have little chance of swinging the merger. These tactics are part of a broader strategy to keep pressing until something gives and then seizing on that opportunity."

Read Ellison's full letter to WBD shareholders:

Dear Warner Bros. Discovery Shareholder,

Over the last few days, following the decision by Warner Bros. Discovery ("WBD") not to engage with Paramount on our $30 per share cash offer to acquire all of WBD, and our reaffirmation of our commitment to delivering our superior offer to WBD shareholders, we keep getting the same question: what happens next?

Paramount started this process about four months ago with a private offer at a significant premium to WBD's $12.54 share price, and our pursuit culminated in the $30 per share all-cash, fully financed proposal we made before WBD entered into the Netflix transaction. When we learned of the terms of that transaction, which are inferior both financially and from the standpoint of timing and certainty of closing, we decided to bring our offer directly to you, through our tender offer.

We are committed to seeing our tender offer through. We understand, however, that unless the WBD board of directors decides to exercise its right to engage with us under the Netflix merger agreement (the "Netflix Agreement"), this will likely come down to your vote at a shareholder meeting. We do not know whether that will be at WBD's upcoming annual meeting or a special meeting. The "advance notice" window for WBD's 2026 annual meeting opens in three weeks, and Paramount will nominate a slate of directors who, in accordance with their fiduciary duties, will exercise WBD's right under the Netflix Agreement to engage on Paramount's offer and enter into a transaction with Paramount. In addition, Paramount will propose an amendment to WBD's bylaws to require WBD shareholder approval for any separation of Global Networks. If WBD calls a special meeting ahead of its annual meeting to vote on the Netflix Agreement, Paramount will solicit proxies against such approval. These actions, coupled with our tender offer, ensure that you get the final decision on which offer is better for you.

WBD has provided increasingly novel reasons for avoiding a transaction with Paramount, but what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer. Our $30 per share in cash is simply more than Netflix's complex multi-variable consideration comprised of (a) $23.25 in cash plus (b) a number of Netflix shares currently worth $4.11 (at Friday's close) plus (c) the to-be-issued Global Networks equity which we have analyzed as having zero equity value¹. In addition to not disclosing the value of the to-be-issued Global Networks spin off, WBD has not disclosed the mechanism by which any debt transferred from Global Networks to the Streaming & Studios segment reduces the cash and stock consideration payable to you.

Along with the WBD shareholders, we have asked for the customary financial disclosure a board is supposed to provide shareholders when making an investment recommendation. But in each of its 14D-9 filings, WBD has failed to include any disclosure about how it valued the Global Networks stub equity, how it valued the overall Netflix transaction, how the purchase price reduction for debt works in the Netflix transaction, or even what the basis is for its "risk adjustment" of our $30 per share all-cash offer. WBD shareholders need this information to make an informed investment decision on our offer — and importantly, Delaware law has consistently required that such information be provided to shareholders. Following the process prescribed under Delaware law, we filed suit this morning in Delaware Chancery Court to ask the court to simply direct WBD to provide this information so that WBD shareholders have what they need to be able to make an informed decision as to whether to tender their shares into our offer.

We do not undertake any of these actions lightly. Make no mistake, our goal remains to have constructive discussions with WBD's Board to reach an agreement that is in the best interests of WBD shareholders. Our objective from the moment we approached WBD was for a collaborative negotiation and a successful transaction that would be a win for both companies, both shareholder groups and all stakeholders. We remain perplexed that WBD never responded to our December 4^th offer, never attempted to clarify or negotiate any of the terms in that proposal, nor traded markups of contracts with us. Even as we read WBD's own narrative of its process, we are struck that there were few actual board meetings in the period leading up to the decision to accept an inferior transaction with Netflix. And we are surprised by the lack of transparency on WBD's part regarding basic financial matters. It just doesn't add up — much like the math on how WBD continues to favor taking less than our $30 per share all-cash offer for its shareholders.

The best outcome for you and for us would be if WBD's Board would exercise the right it has under the Netflix Agreement to engage with Paramount. If it does so, we will be open and constructive to secure the best path forward for WBD and each of you. We have demonstrated our willingness to listen carefully to any feedback we receive from WBD's Board and to respond by offering reasonable solutions — and that remains our mindset and approach.

I believe in our vision for how we can bring these great companies together and deliver for consumers, the creative community and of course, for you. Paramount is committed, my family is committed, and hopefully this helps answer the question of what comes next.

Sincerely,

David Ellison

Chairman and Chief Executive Officer

Paramount Skydance Corporation