Paramount Skydance Sues WBD Over Netflix Merger Disclosure

Paramount Skydance Corporation filed a lawsuit in the Delaware Chancery Court against Warner Bros. Discovery (WBD) on Jan. 12, 2026, to compel financial transparency regarding a US$82.7 billion merger with Netflix. The litigation seeks to enable shareholders to evaluate a competing US$30 per share all-cash offer that Paramount Skydance Corporation claims is financially superior.

The legal action follows the Jan. 7, 2026, decision by the board of directors of WBD to reject the revised proposal from Paramount Skydance Corporation. David Ellison, Chairman and CEO, Paramount Skydance Corporation, says that the WBD board has failed in its fiduciary duty to provide essential valuation details. 

“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,” says Ellison. “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... WBD has failed to include any disclosure about 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 US$30 per share all-cash offer.”

The consolidation dispute originated on Dec. 5, 2025, when Netflix and WBD entered into a definitive merger agreement. Under the terms of this transaction, Netflix would acquire the film and television studios, the HBO library, and the HBO Max streaming platform. Concurrently, WBD would separate its linear assets — including CNN, TNT Sports, and Discovery+ — into a standalone entity named Discovery Global.

The Netflix offer is valued at about US$82.7 billion. This complex multi-variable consideration consists of US$23.25 in cash, a portion of Netflix shares valued at about US$4.11 as of Jan. 9, 2026, and equity in the proposed Discovery Global spin-off. Paramount Skydance Corporation challenged this agreement by launching a series of hostile bids, culminating in a US$108.4 billion proposal to acquire the entire corporation.

The board of directors of WBD has consistently favored the Netflix deal, citing the US$412 billion market capitalization and investment-grade credit rating of Netflix. The board characterizes the Paramount Skydance Corporation offer as a risky leveraged buyout. In a regulatory filing, the board of directors says that the proposal remains inadequate due to a lack of certainty in the ability of Paramount Skydance Corporation to complete the offer and the risks borne by WBD shareholders should the deal fail.

Financial and Strategic Analysis

Paramount Skydance Corporation argues that the financial transparency provided by WBD is insufficient for shareholders to make an informed investment decision. A primary point of contention is the valuation of the Discovery Global "stub equity." Paramount Skydance Corporation conducted an analysis suggesting this entity has zero equity value. WBD has not disclosed its internal valuation of these linear networks, which some independent analysts value at up to US$4 per share.

The financing structure of the Paramount Skydance Corporation bid involves US$40.4 billion in equity and US$54 billion in new debt. This equity is backed by a personal guarantee from Larry Ellison, Co-Founder, Oracle. However, the board of WBD expressed concern regarding the total debt load of US$87 billion for the combined entity. S&P Global rates the credit of Paramount Skydance Corporation at speculative-grade levels, and WBD directors fear a merger would further weaken credit ratings.

In addition to valuation concerns, a shift from the Netflix agreement to the Paramount Skydance Corporation proposal would trigger substantial financial penalties. The board of directors of WBD detailed about US$4.7 billion in additional costs associated with terminating the Netflix deal. These costs include: a US$2.8 billion termination fee payable to Netflix, US$1.5 billion in lender fees, and US$350 million in financing costs.

These expenses would represent a reduction of about US$1.79 per share in value for WBD shareholders. Furthermore, the Paramount Skydance Corporation proposal includes restrictive operating conditions, such as limitations on the ability of the studio to enter new content licensing agreements during the interim period before closing.

The US Department of Justice and the European Commission are reviewing the Netflix transaction. While Paramount Skydance Corporation argues its bid offers greater regulatory certainty by avoiding the vertical integration of a dominant streaming leader acquiring a major studio, a merger between Paramount and WBD would consolidate two of the largest television operators in the United States. This horizontal merger would likely trigger intense antitrust scrutiny regarding the advertising market.

US President Donald Trump has indicated to NBC News that the merger could be a problem due to the significant market share of Netflix. Conversely, the Ellison family maintains established ties with the current administration, which could influence the regulatory outlook.

Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal warn that the merger could lead to increased consumer costs. These concerns follow a recent price hike by Netflix, which lawmakers suggest exacerbates financial pressures on middle-class families. The Writers Guild of America (WGA) continues to oppose the acquisition by Netflix, citing potential antitrust law violations and the reduction of diverse voices in film and television. 

Paramount Skydance Corporation has announced its intention to nominate a slate of directors for election at the WBD 2026 Annual Meeting. These nominees would be tasked with exercising the right of WBD under the Netflix Agreement to engage on the offer from Paramount Skydance Corporation. Additionally, the company will propose an amendment to the bylaws of WBD to require shareholder approval for any separation of the global networks division.