Paramount ordered to turn over merger documents to investor
Paramount ordered to turn over merger documents to investor
A judge has ordered Paramount to release documents related to its merger with Skydance to the Employees’ Retirement System of Rhode Island.
One of the biggest problems that investors have had with the Paramount and Skydance merger throughout the process is the potential for perceived unfair enrichment for Paramount’s controlling shareholder Shari Redstone in comparison to other shareholders. Investor Mario Gabelli and others have expressed concern that the deal rewards Redstone while unevenly compensating Class B shareholders, and now one group of shareholders is getting the chance to pursue its claims. The Employees’ Retirement System of Rhode Island (ERSI), which owns Paramount shares, has been granted access to records concerning the Paramount and Skydance merger in order to pursue its claims that potential corporate wrongdoing occurred.
Key Details:
- ERSI says Redstone “usurped” Paramount opportunities to potentially find a better deal.
- The Delaware Court of Chancery has granted a request from ERSI, forcing Paramount to turn over merger-related documents.
- The order gives ERSI the right to see any documents related to an actual, potential, or proposed sale of Paramount Global.
ERSI is seeking the documents in question on the grounds that Redstone “usurped Paramount’s corporate opportunities.” It is investigating on grounds that Redstone and her holding company National Amusements Inc. (NAI) engaged in “potential wrongdoing” when negotiating a merger deal with Skydance. The group is considering “whether to seek equitable relief to ensure Shari Redstone and NAI do not profit from their wrongdoing.”
On Wednesday, Delaware Chancery Court Vice Chancellor J. Travis Lester wrote that ERSI has “shown by a preponderance of the evidence that there is a credible basis to infer potential corporate wrongdoing in connection with the sale of NAI” and that the employee fund is “entitled to obtain books and records that are both necessary and sufficient to fulfill its purpose.”
The decision grants ERSI to look at a laundry list of important and proprietary documents from Paramount, including any related to actual or potential merger and sale deals. Even emails and text messages from Redstone herself regarding prospective deals have to be turned over, which could give other detractors fuel to poke holes in the Skydance merger if the details become public.
ERSI is not the only entity to ask for more information about the merger. Investing giant Mario Gabelli has sued in Delaware Chancery Court to get ahold of a similar document list, as he’s concerned that the deal unfairly enriches Redstone at the expense of Class B Paramount shareholders. In a filing from January, Gabelli said there was a “credible basis to believe that NAI, members of the board, and possibly senior officers of Paramount may have breached their fiduciary duties to the company as NAI apparently has orchestrated a transaction to benefit itself.”
Class B stakeholder Scott Baker has also initiated a class-action suit on similar grounds, and is seeking $1.65 billion in damages. The California State Teachers’ Retirement System (CalSTRS) has also raised concerns about the merger and says damages could go higher than those asked for in Baker’s lawsuit.
Paramount’s merger with Skydance is still on track to close by 2025, but there may be some expensive payouts to make before it’s all done and dusted.
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