Delaware Judge Slows Paramount Skydance Suit, Giving Netflix an Edge in Warner Bros. Discovery Battle

In a packed courtroom a few blocks from the Christina River, a Delaware judge handed Netflix a procedural but potentially pivotal advantage in Hollywood’s biggest corporate fight.

On Jan. 15, Vice Chancellor Morgan T. Zurn of the Delaware Court of Chancery rejected a request by Paramount Skydance to fast-track its lawsuit against Warner Bros. Discovery, a ruling that slows the studio’s hostile campaign to wrest Warner from Netflix and buys time for a board that has already chosen Netflix’s smaller, more complex offer.

The decision injects a new twist into a three-way contest that will help decide who controls one of the last major independent studios — and a vast trove of franchises from Harry Potter to Game of Thrones — at a moment when regulators, unions and politicians are already warning about the power of media conglomerates.

Warner Bros. Discovery, formed in 2022, agreed on Dec. 5 to be acquired by Netflix in a cash-and-stock transaction valuing the company at roughly $82 billion to $83 billion, including debt. Days later, Paramount Skydance, a publicly traded company controlled by the Ellison family, countered with an unsolicited all-cash bid of $30 a share, implying a valuation of about $108.4 billion.

Warner’s board has twice urged shareholders to reject Paramount Skydance’s tender offer and on Jan. 7 reaffirmed its unanimous support for the Netflix deal, setting up a confrontation that is now unfolding simultaneously in Delaware, on Wall Street and in Washington.

A fight over timing and transparency

Paramount Skydance sued Warner Bros. Discovery in Delaware Chancery Court in mid-January as a WBD shareholder, accusing the company and its directors of withholding information about how they evaluated the competing bids.

The complaint argues that Warner has not adequately disclosed how it valued the planned spin-off of its cable networks — a new company dubbed Discovery Global — and how it adjusted Paramount Skydance’s $30-a-share cash offer for regulatory and financing risks. The lawsuit seeks additional disclosures before shareholders make decisions on whether to tender into Paramount’s hostile bid or, later, vote on the Netflix merger.

To make that happen, Paramount Skydance asked Zurn to expedite the case, saying delay would harm it and other shareholders by leaving them to act without full information during a live takeover battle.

Zurn declined. In an oral ruling, she said Paramount Skydance had not shown “cognizable irreparable harm” as a shareholder that would justify jumping the case ahead of others on the court’s crowded docket. The harm Paramount described, she indicated, flowed primarily from its position as a competing bidder rather than from its status as an investor in Warner.

The suit itself continues on a normal schedule, but without the accelerated timeline Paramount sought.

Warner welcomed the outcome. In a statement after the ruling, the company said it was “pleased a Delaware court agreed with our belief and rejected the notion that this lawsuit needed special treatment,” calling Paramount Skydance’s request for speed “urgency theater.”

Paramount Skydance stressed that the decision went only to timing, not the merits of its claims. It reiterated that it believes Warner shareholders are entitled to a fuller explanation of how the board compared the two deals and said it intends to continue pursuing the case, extend its tender offer and prepare to nominate an alternative slate of directors at Warner’s next annual meeting.

Two very different paths for Warner Bros. Discovery

At the heart of the battle are sharply different visions for Warner’s future — and for how much risk shareholders should accept.

Under the agreement signed with Netflix, Warner Bros. Discovery shareholders would receive $27.75 per share in consideration at signing: $23.25 in cash and $4.50 in Netflix stock, subject to a collar that adjusts the share count if Netflix’s price moves outside a specified range. In addition, Warner would spin off its cable networks — including CNN, TBS, TNT, Discovery Channel, HGTV and Food Network — into a separate company, Discovery Global, whose shares would be distributed to existing Warner investors.

The transaction values Warner’s enterprise, including debt, at roughly $82 billion to $83 billion. Netflix would acquire the film and television studio, HBO and the Max streaming service, along with Warner’s deep library of intellectual property.

Paramount Skydance’s rival proposal is structurally simpler: $30 in cash for every Warner share, with no stub company left behind. The bidder says that price represents a 139% premium to Warner’s undisturbed trading price in September and values the company at about $108.4 billion on an enterprise basis.

Paramount Skydance has lined up about $54 billion to $55 billion in debt commitments from a consortium of banks and credit providers, with equity backstopped by the Ellison family and RedBird Capital. The company has emphasized a $40.4 billion personal guarantee from Larry Ellison, co-founder of Oracle and Paramount’s controlling shareholder, as evidence that financing risk is manageable. It has also agreed to pay Warner a reverse termination fee of roughly $5.8 billion if regulators block the deal.

Warner’s board has repeatedly dismissed that offer as inferior once regulatory, financing and switching costs are factored in.

In its Jan. 7 letter to shareholders, the board said that abandoning the Netflix agreement would trigger a $2.8 billion break-up fee, about $1.5 billion in costs tied to an associated debt exchange and roughly $350 million in additional interest expense. Those items total roughly $4.7 billion, or about $1.79 per share. When those costs are accounted for, the board argues, Paramount Skydance’s apparent $2.25 per share premium over Netflix’s $27.75 shrinks significantly.

The board has also criticized the Paramount Skydance bid as an “extremely leveraged transaction” that would leave the combined company dependent on a large volume of new borrowing relative to Paramount Skydance’s own market value. It warns that the structure resembles a high-risk leveraged buyout that could expose Warner’s business to financing market shocks.

Paramount Skydance counters that its all-cash proposal is clearly superior and carries fewer regulatory obstacles than allowing the world’s largest subscription streaming platform to combine with HBO and Warner Bros.

In public letters, Paramount Skydance has argued that the Discovery Global spin-off will be a “sub-scale, over-leveraged” cable bundle that is effectively worthless, estimating its value between zero and 50 cents a share. By contrast, some analysts and Warner’s advisers have suggested the stub could be worth $3 to $5 per share, a gap in valuation that lies at the center of Paramount’s disclosure suit.

Shareholders caught between price and risk

For Warner investors, the choice is complicated by uncertainty on several fronts.

Netflix’s stock has fallen roughly one-quarter since word of a possible tie-up began to circulate in 2025, trimming the perceived value of the stock portion of its offer. People familiar with the matter have said Netflix is weighing whether to revise its bid to be all cash, which could address some shareholder concerns about volatility.

Both potential transactions would face intense antitrust scrutiny in the United States and abroad.

A combined Netflix–Warner streaming business could control close to half of global subscription video-on-demand customers, by some estimates, far outpacing rivals such as Disney and Amazon. Sen. Elizabeth Warren, a Massachusetts Democrat, has called the proposed Netflix–Warner deal “an anti-monopoly nightmare” and urged the Justice Department and Federal Trade Commission to challenge it, saying it would “threaten competition, reduce jobs, and raise prices.”

Warren has also criticized Paramount Skydance’s hostile bid, describing it as a “five-alarm antitrust fire” and raising questions about foreign and politically connected sources of financing.

Sen. Roger Marshall, a Kansas Republican, has warned separately that a Netflix–Warner merger represents “major vertical and horizontal consolidation” and should be examined under what he called “especially rigorous review.”

Hollywood labor unions have taken a similarly dim view of both proposals. The Writers Guild of America East and West said in a December statement that “the world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent,” predicting fewer jobs and less diverse programming. The guild has also argued that a Paramount–Warner tie-up would be “a disaster for workers and for competition.”

Those concerns are playing out against a broader backdrop of unease over media consolidation following combinations such as Comcast’s acquisition of NBCUniversal, AT&T’s purchase of Time Warner and Disney’s takeover of most of 21st Century Fox.

Some shareholders are pushing back against Warner’s strategy as well. Pentwater Capital Management, a major Warner investor, has publicly questioned the board’s refusal to engage more seriously with Paramount Skydance’s enhanced offers and has signaled it may oppose both the Netflix transaction and the re-election of incumbent directors if a higher cash bid remains on the table.

For now, though, participation in the hostile tender has been limited. By late December, fewer than 400,000 Warner shares had been tendered into Paramount Skydance’s offer, a small fraction of the company’s outstanding stock. Paramount Skydance has said it will extend the deadline beyond Jan. 21 but has not yet set a new date.

Delaware’s quiet influence

Delaware’s refusal to accelerate Paramount Skydance’s disclosure case does not decide who will buy Warner Bros. Discovery, or whether any deal will be completed. Regulators in Washington, Brussels and London will ultimately have a significant say, and Warner shareholders will have to vote on any change of control.

But the ruling underscores how the procedural rules of the Delaware Court of Chancery — particularly its insistence on a clear showing of irreparable harm before granting expedited review — can shape the pace and tactics of modern takeover fights.

With the case now on a standard schedule, Warner’s board has more breathing room to sell its preferred Netflix transaction to investors, while Paramount Skydance will have to rely more heavily on its tender offer and a threatened proxy campaign to gain leverage.

The outcome will help determine whether one of Hollywood’s most storied studios ends up inside a global streaming platform or as part of a highly leveraged traditional media conglomerate — or whether skeptical shareholders and wary regulators decide neither option passes muster. For the moment, the opening scene in that drama belongs not to a studio mogul, but to a chancery judge in Wilmington.