Shareholder Sues Paramount Over Merger Deal with Skydance
Lawsuits have been threatened by other Paramount investors, but this is the first action taken by a Class B shareholder in the company.
It seemed almost certain that legal action was coming in Paramount Global’s new merger deal with Skydance Media. Throughout the negotiating process, nonvoting Paramount shareholders have feared that the deal would enrich company head Shari Redstone at their expense, and one such investor has seen those fears sufficiently realized to file a lawsuit over the merger in a Delaware court.
Key Details:
- Shareholder Scott Baker has filed a class-action lawsuit against Paramount and Skydance.
- Baker says there isn’t enough money set aside in the deal to buy out all Class B shareholders.
- Paramount insisted on a 45-day “go shop” period for the deal to ensure no other buyers could beat the terms.
According to the Los Angeles Times, the case against Paramount and Skydance is being brought by Scott Baker, a class-B shareholder who alleges that the Redstone effort to push the deal through left investors like him behind.
Baker’s suit says that as the deal is currently constructed, Paramount’s Class B shareholders stand to suffer more than $1.6 billion in damages. The structure of the deal will see Skydance by out National Amusements Inc., the holding company that controls most of Paramount’s Class A voting stock. Then, Skydance plans to merge Paramount with its own movie studio. The deal is worth around $8 billion overall, but according to Baker, some will get much richer than others.
“The principal reason for the merger is to cash out Redstone’s floundering Paramount investment — and at a substantial premium to what will be received by other stockholders,” Baker’s suit alleges. “Additionally, the Merger will allow Redstone to pay down NAI’s fast-maturing debt.
“There is not enough cash in the deal to buy out all of the non-NAI Class B shares,” it continues. “Instead, these shareholders will get a mix of cash and Class B stock in the merged entity… only worth $12.23 per Paramount Class B share.”
Are Others Trying to Stop the Paramount Deal?
Paramount has been holding its breath to see if one of the investors who represents a huge swath of Class B shareholders will file a lawsuit along these lines. Mario Gabelli and his firm have been dubious about the Skydance deal from the beginning and has not backed off that position since.
Gabelli has already filed one lawsuit regarding the merger, but it was merely to get a better look at Paramount’s finances in order to ensure the deal is fair for all shareholders. That could lead to more legal action on his part, or his clients could potentially be granted status as class members in Baker’s suit.
The Paramount and Skydance deal took months to put together. One of the key provisions in the deal was a 45-day “go shop” window to allow Paramount to ensure there was no better deal available. Part of the reason for that provision was to help protect Paramount against lawsuits like Baker’s, as it can be argued that even if the deal doesn’t max out the money for Class B shareholders, no better options were available to the company.
Skydance CEO David Ellison has already laid out a vision for the new Paramount. He’s seeking $2 billion in cost cuts company-wide and also says he wants to rebuild the Paramount+ streaming service from the ground up to better serve viewers and bring in more revenue.
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