On the evening of December 3, lawyers from Quinn Emanuel Urquhart & Sullivan sent a letter to Warner Bros. Discovery Inc. expressing “serious concerns about the fairness and appropriateness” of the company’s sale process. The client was David Ellison, chairman and CEO of Paramount Skydance Corp., who had been negotiating with Warner Bros. months ago and feared the business was slipping out of his hands.
Warner Bros. CEO David Zaslav and his advisors were caught off guard. They believed they conducted a fair process. Zaslav had met or spoken with Ellison at least six times in the previous two months. Earlier that day, the Paramount team had signaled that it would send a revised proposal to Warner Bros. Instead, the company received a legal threat.
Hours later, Ellison’s closest circle realized they had made a mistake. Some didn’t even know the letter would be sent, according to people familiar with the matter. Ellison’s aides reached out to his counterparts at Warner Bros. and said the letter had been “useless,” according to a filed document. The next morning, Paramount presented its revised proposal—the sixth—and Ellison sent a message to Zaslav commenting on the offer. With no response, he wrote again.
“Please know that despite the noise of the last 24 hours, I have nothing but respect and admiration for you and the company,” he wrote. “It would be the honor of a lifetime to be your partner and the owner of these iconic assets.” Zaslav again did not respond.
It was already too late.
The board’s decision and Netflix’s entry
That night, the Warner Bros. board decided to sell its namesake studio and HBO Max streaming business to Netflix Inc. During the previous three months, Ellison’s assault on Warner Bros. it seemed like a fait accompli. But Paramount’s chaotic last-minute effort was just one of several mistakes that weakened Ellison and opened up space for a competitor. So Netflix — a Silicon Valley outsider that had transformed the industry over the past two decades — agreed to acquire one of the entertainment industry’s oldest and most admired studios.
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Ellison, son of Oracle Corp. co-founder Larry Ellison, is not out of the running yet. He appealed directly to shareholders with an offer of $30 per share, hoping they would reverse the board’s decision. He could also elevate his proposal and use his father’s relationship with President Donald Trump to pressure regulators to intervene and block the Netflix deal.
“The Ellisons are smart and aggressive,” said Kevin Mayer, former chief strategy officer at Walt Disney Co., in an interview with Bloomberg TV. “I think they will come back with a higher offer. The shareholders have not yet spoken.”
An increasingly uncertain path
After months of insisting he was the only one capable of closing the deal, Ellison now faces an uncertain path to acquiring assets that most analysts say are essential to revitalizing his company. Shares of Warner Bros., which soared when Paramount first approached, are down 15% in the last month as shareholders fear the deal is slipping away.
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For more than a year, Ellison and his allies have been discussing the purchase of Warner Bros., even before concluding their previous negotiation. In August, Ellison spent $8 billion to take control of Paramount, aware that it was a weakened asset. The company, which owns the eponymous studio, as well as MTV and Nickelodeon, suffered years of mismanagement that drained the resources needed to compete in streaming. Its cable networks, responsible for almost all of its profits, are in terminal decline.
Ellison believed that his vision and ambition, backed by the family’s vast financial resources, would give Paramount a chance to rise again. But he also knew the turnaround would take years. A merger with Warner Bros. would give him the scale to compete at the highest level.
Internal resistance and rejected offers
Film producer as Top Gun: Maverick and the franchise Mission: ImpossibleEllison realized that Zaslav would be reluctant to sell. The 65-year-old CEO of Warner Bros., known for his constant energy, enjoyed running one of Hollywood’s big studios. Even with the company’s shares falling, Zaslav exuded confidence. Rather than sell the company and admit defeat, he and the board chose to split it in two. Ellison even considered a hostile offer, but preferred to negotiate directly with management.
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On September 11, Ellison’s intention to purchase Warner Bros. leaked to the press, taking Zaslav by surprise. Still, a historic supporter of industry consolidation, he met with Ellison on September 14 to discuss a possible agreement. Ellison offered $19 per share.
The following month, the board of Warner Bros. received and rejected three proposals, citing insufficient pricing, Paramount’s excessive debt and strong regulatory risk. Part of the payment would be made in shares, although the Ellison family would control the new company. Still, Ellison continued to insist on meetings. Zaslav and his longtime ally, John Malone, even met with Larry Ellison. The Ellisons offered Zaslav a position at the combined company and hundreds of millions of dollars in additional compensation.
The turning point of the process and the final offensive
In mid-October, the board concluded it could no longer conduct the process privately. Netflix co-CEO Ted Sarandos and Comcast Corp. CEO Brian Roberts have expressed interest. On October 21, Warner Bros. officially announced a strategic review.
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Meanwhile, Paramount demonstrated confidence, saying it was the only one capable of obtaining approval in Washington and that the president favored the company. Analysts and the press reinforced the perception that the purchase was inevitable.
The Warner Bros. board, however, saw Paramount as a difficult partner: requests for excessive access to data, attempts to contact advisors directly, demands for exclusivity and severe restrictions on the company’s management after the deal.
Furthermore, none of Paramount’s first five offers beat the financial terms of Netflix, which offered $27.75 per share in cash and stock after the cable spinoff.
The dispute remains open
Ellison appealed directly to shareholders on December 8, asking them to surrender their shares to his bid. At the same time, Paramount started to argue that the agreement with Netflix would be anti-competitive and harmful to the entertainment ecosystem, creating an “insurmountable monopoly” in streaming.
Despite this, the board of Warner Bros. recommended rejecting the proposal, stating that the projected synergies would make Hollywood “weaker, not stronger.”
While Warner Bros. and Netflix move forward as if the deal was closed, Ellison continues trying to reverse the game. “This isn’t over yet,” said Alex Fitch, manager of Harris Associates, one of Warner Bros.’ largest shareholders.
Ellison continues his offensive, betting that shareholders can still change the course of history.
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