Paramount letter questions Warner Bros. Discovery sale process

Paramount Skydance is calling foul on how Warner Bros. Discovery has conducted its sale process.

In a letter reviewed by CNBC, Paramount attorneys told Warner Bros. Discovery CEO David Zaslav that Paramount was questioning the “fairness and adequacy” of the process, which officially launched in October. This week, Paramount, Netflix and Comcast submitted second-round bids to acquire some or all of Warner Bros. Discovery’s assets, CNBC previously reported.

“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,” reads the letter from attorneys at Quinn Emanuel. “We specifically request and expect this letter will be shared and discussed with the full board of directors of WBD.”

In particular, Paramount’s letter calls out reports that WBD’s management appears to favor Netflix’s offer.

Netflix has made an offer of mostly cash, while Paramount’s latest bid was all cash, according to people close to the matter who declined to be named speaking about confidential dealings. All three companies submitted higher bids than their initial offers, the people told CNBC.

As of Thursday morning, Netflix was the leading bidder based on how WBD is valuing the offers, people familiar told CNBC. Comcast executives, for their part, continue to be disciplined in the company’s offer as to not anger shareholders by taking on additional debt and risking its balance sheet, according to people familiar with that company’s thinking. Comcast leadership has previously said that its bar for M&A is generally high.

Warner Bros. Discovery told CNBC it confirmed to Paramount that it had received the letter and would share it with members of the WBD board.

“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,” the company said in its response to Paramount.

WBD requested third-round bids from the potential buyers, due Thursday, sources told CNBC. The company expects to announce a winner as early as next week, sources said.

While first-round bids arrived in mid-November, Paramount has been vying to acquire the entirety of Warner Bros. Discovery — which includes its streaming service HBO Max, film studio Warner Bros. and a portfolio of cable TV networks like TNT and TBS — since September, CNBC previously reported.

Warner Bros. Discovery rebuffed three offers made by Paramount, the last of the those for $23.50 a share, before launching a formal sale process to beckon other buyers, CNBC previously reported.

Netflix and Comcast are interested only in WBD’s streaming and film studio business, CNBC has reported….