Paramount CEO David Ellison on why he was forced to 'ignore' Warner Brothers Board and reach out directly to company's shareholders

Paramount Skydance CEO David Ellison has now revealed the reason that why he bypassed the Warner Bros. Discovery (WBD) board and took his $30-per-share hostile bid directly to shareholders. As reported by Business Insider, speaking at the UBS media conference, Ellison said that the board could not account his offer outright without raising questions about its fiduciary responsibilities.

For those unaware, Fiduciary responsibility means a legal and ethical obligation for one party (the fiduciary) to act in the best interests of another. Ellison was seen explaining, “If they accept the offer exactly as it is today, right, then they're admitting breach of fiduciary duty, so I don't think they can just take that.”The comments made by Ellison highlight the legal and governance complexities facing WBD’s board, which had already signaled its preference for Netflix’s $27.75-per-share bid for WBD’s studio and streaming assets.

Paramount’s counteroffer, launched Monday, covers the entire company, including TV networks such as CNN and TNT.

Paramount’s strategy

Ellison also stressed on the fact that Paramount’s hostile bid was said to the private offer delivered to WBD last week. “We wanted to communicate to everyone: We didn’t change the offer. This is exactly what we sent them,” he said. By going directly to shareholders, Ellison is betting that investors will Paramount’s all-cash proposal as superior to Netflix’s mixed cash-and-stock deal.

Shareholders have until January 8 to decide whether to back Paramount’s bid.

What WBD said board said

In a statement, WBD said its board would “carefully review and consider Paramount Skydance’s offer” in consultation with independent financial and legal advisors, stressing that any decision would be consistent with its fiduciary duties.

The Road Ahead

Ellison’s remarks suggest he may need to sweeten the deal to secure shareholder approval, despite insisting that Paramount’s current bid is “by far the superior offer.” Paramount’s SEC filings also disclosed that Ellison texted WBD CEO David Zaslav last week, noting: “Please note importantly we did not include ‘best and final’ in our bid.”