Paramount letter questions Warner Bros. Discovery sale course of

Expensive Mr. Zaslav: We write on behalf of Paramount Skydance Company (“Paramount”, “we” or “us”) to precise our severe issues concerning the equity and adequacy of the bidding course of for a possible mixture with Warner Bros. Discovery (“WBD” or “you”). It has turn into more and more clear, by way of media reporting and in any other case, that WBD seems to have deserted the illusion and actuality of a good transaction course of, thereby abdicating its duties to stockholders, and launched into a myopic course of with a predetermined consequence that favors a single bidder. We particularly request and anticipate this letter shall be shared and mentioned with the complete board of administrators of WBD.

We’ve got just lately seen reporting within the U.S. and overseas media that offers severe trigger for concern. The German newspaper Handelsblatt just lately reported on a gathering that reportedly came about in Brussels between Gerhard Zieler, President of WBD’s Worldwide Enterprise and a direct report back to WBD’s Chief Government Officer, who “arrived with a three-person workforce,” with the E.U. Fee Vice President Hena Virkkunen, to debate the potential merger prospects for WBD. In that dialog, the article stories that “issues had been raised that the Ellison household’s deliberate acquisition of Warner Bros. Discovery might result in extreme media focus,” and that the E.U. Fee would think about intervening in a possible merger with Paramount because of this. The article quotes “sources shut” to Zeiler as saying “that the talks with the Fee had been vital as a result of each Warner and the EU wished to protect media range.” The implications of such a gathering, if it occurred, are clear and evince a tacit resistance to, if not energetic sabotage of, a Paramount provide.

Whereas this report is regarding in itself, this isn’t an remoted report relating to purported WBD resistance to a mix with Paramount. A number of U.S. media retailers have reported on the passion by WBD administration for a transaction with Netflix, and on statements by administration {that a} transaction between WBD and Netflix can be a “slam dunk,” whereas additionally referring to Paramount’s bid in a adverse gentle. Further reporting for the reason that submission of revised bids on December 1 has indicated that WBD’s “board has actually warmed to” a transaction with Netflix because of the “chemistry between” WBD administration and Netflix administration. We’ve got come to you first to inquire whether or not this reporting is correct, and to have interaction in a productive dialogue with you round any precise or perceived points that it could mirror.

Furthermore, these media stories echo comparable indications that now we have been listening to all through this course of, regardless of what we considered as in any other case productive conversations that now we have had with WBD management. Paramount has a reputable foundation to imagine that the gross sales course of has been tainted by administration conflicts, together with sure members of administration’s potential private pursuits in post-transaction roles and compensation because of the financial incentives embedded in latest amendments to employment preparations. These issues are amplified by indications of director bias and beholdenness to others whose pursuits could not align with the stockholders’, and the truth that options involving solely sure WBD property are being prioritized however their heightened regulatory threat and potential to deprive stockholders of consideration for the whole lot of WBD’s enterprise worth.

Additional, as you realize, Paramount agreed to sure standstill preparations in change for the chance to take part in a very aggressive and unbiased bidding course of. Paramount didn’t cut price for WBD to foster, whether or not deliberately or unintentionally, a tilted and unfair course of. We imagine that each one events to this course of ought to have a shared want for, and can mutually profit from, an unimpeachable transaction course of. As we assume you agree, even discounting the accuracy of any media stories, simply the looks of a flawed course of imperils any potential transaction that may consequence and should undermine the potential worth maximization to WBD stockholders from any potential transaction.

In gentle of our grave issues relating to the integrity of WBD’s course of, we search affirmation as as to whether WBD has appointed an impartial particular committee of disinterested members of its board to contemplate the potential transaction alternatives and to make a last willpower relating to a sale or break-up of all or a part of the corporate. If not, we strongly urge you to empower such a particular committee comprised of administrators with no potential look of bias or beholdenness to others whose pursuits could differ from these of the stockholders. This is able to appear to be an vital step at this stage, to make sure the equity and unimpeachability of the transaction course of and to maximise the worth of no matter consequence WBD determines to pursue. Partaking with WBD all through this course of, now we have been inspired by the large potential from a mix of our entities. We stay assured that the Paramount provide would supply the utmost worth to WBD stockholders and stay up for the chance to proceed to have interaction with you productively on this course of. However at this level we should insist on assurances and steps taken to make sure that a very truthful and impartial course of is being carried out, each for Paramount’s profit and within the curiosity of WBD’s stockholders.