Paramount Skydance sued Warner Bros. Discovery on Monday, demanding more information on a rival $82.7 billion deal with Netflix and escalating an already fierce battle to take control of one of the most storied Hollywood studios.
The David Ellison-led company also said it planned to nominate directors to Warner Bros.' board, in one of its most aggressive steps to convince investors that its $108.7 billion all-cash bid is superior to Netflix's cash-and-stock deal.
Paramount and Netflix have been in a heated battle for Warner Bros., its prized film and television studios and its extensive content library, which includes "Harry Potter" and the DC Comics universe.
Warner Bros. last week rejected Paramount's latest offer, advising shareholders to vote in favor of the Netflix deal.
In a letter to shareholders, Paramount also said it would propose an amendment to Warner Bros.' bylaws that would require shareholder approval for any separation of the media giant's cable TV business, which is key to the Netflix deal.
Paramount argues that its all-cash bid of $30 per share for the whole of Warner Bros. is superior to Netflix's cash-and-stock offer of $27.75 per share for the studios and streaming assets and will more easily clear regulatory hurdles.
Paramount filed the lawsuit in the Delaware Court of Chancery, seeking to force disclosure of the financial analysis behind the Warner Bros board's support for the Netflix merger.
The CBS parent said last week the value of Warner Bros.' cable spinoff was virtually worthless and reiterated its amended bid after another rejection from Warner Bros.' board. With Monday's lawsuit, Paramount has escalated its actions, but it has not yet increased the price it is willing to pay.
"I don’t think the lawsuit matters much. It would take ages to get through the court system if they full-on go that route," Craig Huber, analyst at Huber Research Partners, said. "If they want Warner Bros. bad enough, raise the bid. Money talks."
Warner Bros. has also said it will owe Netflix a $2.8 billion termination fee if it walks away from the agreement, part of $4.7 billion in extra costs to end the deal.
The amended proposal had included $40 billion in equity personally guaranteed by Oracle's co-founder Larry Ellison, the father of Paramount CEO David Ellison, and $54 billion in debt.
"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," Paramount wrote in the investor letter.
"Unless the WBD board of directors decides to exercise its right to engage with us under the Netflix merger agreement, this will likely come down to your vote at a shareholder meeting," it added.
Paramount argued that the disclosure of Warner Bros.' financial analysis is crucial for investors weighing whether to tender their shares to Paramount before the offer– which can be extended – expires on Jan. 21.
"Time is of the essence," Paramount said in the lawsuit against Warner Bros., CEO David Zaslav and key investor John Malone, among others. "Any decision concerning an extension will depend, in part, on the number of shares tendered."
Warner Bros. said in a statement that the lawsuit was "meritless," adding that Paramount had yet to "raise the price or address the numerous and obvious deficiencies of its offer."
Netflix did not immediately respond to a request for comment.
Shares of Warner Bros. were down 1.6% on Monday, while Netflix was flat and Paramount was up 0.4%.
