Paramount Accuses Warner Bros of Rigging Studio Sale

Paramount Skydance is raising concerns about how Warner Bros. Discovery is handling its sale process. In a letter reviewed by CNBC, Paramount’s lawyers told CEO David Zaslav that the process may not be fair and seems to favor one bidder.

“It has become increasingly clear, through media reporting and otherwise, that WBD appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders, and embarked on a myopic process with a predetermined outcome that favors a single bidder,” the letter from Quinn Emanuel attorneys reads.

“We specifically request and expect this letter will be shared and discussed with the full board of directors of WBD.”

Paramount pointed to reports suggesting that management is leaning toward Netflix’s offer. Sources told CNBC that Netflix submitted a mostly cash offer and was the leading bidder based on how Warner Bros. Discovery is evaluating the proposals. Paramount and Comcast also submitted second-round bids this week.

Comcast, meanwhile, has been cautious with its offer to avoid taking on extra debt that could upset shareholders. Warner Bros. Discovery confirmed it received Paramount’s letter and said it would share it with the board.

In a statement, the company said, “Please be assured that the WBD Board attends to its fiduciary obligations with the utmost care, and that they have fully and robustly complied with them and will continue to do so.”

WBD expects to announce a winner as early as next week, sources told CNBC. Paramount has been pursuing the full company, which includes HBO Max, Warner Bros. studio, and cable networks like TNT and TBS, since September. The company previously made three offers, with the last at $23.50 per share, all of which WBD rejected before formally inviting other buyers to bid.

Netflix and Comcast are focused on WBD’s streaming and film studio businesses. Before the sale, Warner Bros. Discovery was planning to split into two parts: Warner Bros., including streaming and studios led by Zaslav, and Discovery Global, covering cable networks run by CFO Gunnar Wiedenfels.

Paramount’s lawyers also questioned whether Zaslav has been biased against a merger with Paramount from the beginning. The letter asks if WBD appointed an independent committee of disinterested board members to oversee the sale. “If not, we strongly urge you to empower such a special committee comprised of directors with no potential appearance of bias or beholdenness to others whose interests may differ from those of the stockholders,” the letter reads.

“This would seem to be an important step at this stage, to ensure the fairness and unimpeachability of the transaction process and to maximize the value of whatever outcome WBD determines to pursue.”