Lawyers for Paramount Skydance sent a letter to Warner Bros. Discovery General manager David Zaslavexpressing “serious concerns” about the perceived unfairness of the UBI sales process. Lawyers suggested that the Warner Bros. board of directors. Discovery “has embarked on a myopic process with a predetermined outcome that favors a single bidder,” i.e. Netflix.
Warner Bros. Board of Directors Discovery is checking Submissions for the second round were submitted on December 1 by David Ellison's Paramount Skydance. (which is seeking to acquire the entire company for cash), as well as Netflix and Comcast (which are only bidding for the Warner Bros. streaming and studio properties).
“Paramount has reasonable grounds to believe that the sales process was marred by management conflicts, including the potential personal interests of some members of management regarding post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to the terms and conditions of employment,” Paramount Skydance lawyers said in a Dec. 3 letter to Zaslav. Paramount's letter also states that it “has become increasingly clear through media reports and other sources that WBD appears to have abandoned the appearance and reality of a fair transaction process, thereby abdicating its responsibilities to shareholders, and has embarked on a myopic process with a predetermined outcome that favors a single bidder.”
Paramount's lawyers cited US media reports of WBD management's “enthusiasm for the Netflix deal, as well as management's statements that a deal between WBD and Netflix would be 'troublesome,' and also referred to Paramount's proposal in a negative light” and that “WBD's board was actually enthusiastic” about the Netflix deal due to the “chemistry” between WBD management and Netflix management.
Last month, amid a review of mergers and acquisitions, the WBD board of directors changes were made to Zaslav’s employment contractsas well as CFO Gunnar Wiedenfels, Chief Revenue Officer Bruce Campbell and Head of Streaming and Gaming JB Perrett to ensure their stock options remain valid in the event of a sale.
In a response sent Thursday morning (December 4), lawyers for Warner Bros. Discovery wrote that they confirmed receipt of the letter sent on behalf of Paramount Skydance. “We have forwarded the letter to members of the Warner Bros. board of directors. Discovery (“WBD”),” WBD said in its response letter. “Please be assured that the WBD Board of Directors treats its fiduciary responsibilities with the utmost care and that they have fully and strictly complied with them and will continue to do so.”
In their letter, Paramount's lawyers said the company “agreed to certain standstill agreements in exchange for the opportunity to participate in a truly competitive and fair bidding process. Paramount did not enter into the deal with WBD to facilitate, intentionally or unintentionally, a distorted and unfair process.”
The lawyers said they are seeking “confirmation as to whether WBD has appointed an independent special committee of disinterested members of its board of directors to review potential transaction opportunities and make a final determination regarding the sale or divestiture of all or part of the company. If not, we urge you to authorize such special committee of directors without potentially showing bias or reliance on others whose interests may differ from those of shareholders.”
Paramount's letter concluded: “We remain confident that Paramount's proposal will provide maximum benefit to WBD shareholders and look forward to continuing to engage productively with you in this process. But at this stage, we must insist on assurances and steps taken to ensure that the process is conducted in a truly fair and independent manner, in the best interests of both Paramount and WBD shareholders.”
