After months of speculation and backdoor meetings, Paramount Global has reportedly settled on a merger partner: Skydance Media, the film production company behind Top Gun: Maverick and Mission: Impossible — Dead Reckoning Part One.
Skydance — led by David Ellison, the son of Oracle co-founder and billionaire Larry Ellison — has agreed to pay a “little more” than $2 billion for National Amusements, the parent company behind Paramount, Bloomberg News reported. Its current head, Shari Redstone, led Viacom and CBS’s 2019 merger into what is now called Paramount Global.
The companies have agreed to a month of exclusive talks and settled on a deal that values Skydance at around $5 billion. But the move has left shareholders deeply displeased — and they’re voicing it with a mailbag of indignant letters. Among the notes landing on Paramount’s doorstep: the entertainment giant is puppeteering “organized schemes,” the merger is doomed under a “silver-spooned” nepo-hire, and an “avalanche of litigation” could soon be careening the company’s way.
Or perhaps shareholder sentiment could be captured in just three words: “GOVERN YOURSELF ACCORDINGLY.”
Paramount’s shareholder saga
Why the outrage? Redstone owns 77% of Paramount’s voting rights and will get a premium price for the shares held by National Amusements, according to Bloomberg. But other investors could see their shares get diluted if the deal goes through at the current price. The companies are discussing a dividend or stock repurchase to get approval from those shareholders and the elimination of Paramount’s two-class structure, Bloomberg reported.
The deal would also put Ellison as CEO of the new entity; his father has been named a candidate to lead its new board of directors.
Four Paramount directors — former Spotify executive Dawn Ostroff, former Sony entertainment president Nicole Seligman, veteran investment banker Frederick Terrell, and Redstone’s longtime attorney Rob Klieger — are expected to resign in the coming weeks, The Wall Street Journal reported. All but Klieger are members of a special committee created in January to evaluate potential merger deals
Paramount stock is up more than 7% in trading Thursday. However, it’s dropped more than 16% since April 3, when Bloomberg first reported that a tentative deal had been reached.
Quartz has collected some of the more colorful reactions to the proposed merger, as told through its non-Redstone shareholders.
“They’re basically stealing the company”
Matrix Assets Advisors, which owns more than 355,000 Paramount shares, sent the board a letter expressing its “distress” over reports that it would consider Skydance’s “sub-optimal” bid. Matrix highlighted its concerns that Paramount would not consider other reported bids.
On March 31, private equity firm Apollo Global Capital offered to acquire all of Paramount for $27 billion. But Paramount’s board declined to engage with the proposal, Variety reported. Other reported bids have included Warner Bros. Discovery’s abandoned offer, and an proposal from media mogul Byron Allen.
“Those things are all patently absurd,” David Katz, Matrix’s chief investment officer, told The Wrap. “If the Apollo deal is worth $21 a share, and if Skydance is getting this business from the regular shareholders at $11 a share, they’re basically stealing the company and all these extras don’t amount to anything.”
In its letter to Paramount, the firm noted that the deal was a “home run” for Redstone at the “expense of the non-controlling shareholders.”
Cease, desist, rinse, repeat
Aspen Sky Trust, which owns more than 6.5 million Paramount shares, sent National Amusements a letter threatening litigation if it goes through with its “organized schemes to defraud the stockholders.”
The firm’s lawyers said the letter is a one-time courtesy demand to cease-and-desist from continuing with its discussions with Skydance. Aspen — like Matrix — notes that Skydance’s reported “undervalued” proposal would make Redstone money at the expense of other shareholders.
“Be assured that this will be the only courtesy provided to you before the initiation of litigation,” lawyers from The Riley Firm wrote to National Amusements. Aspen has given Redstone until the end of Friday to agree to its demands, or it will pursue “all available legal remedies.”
Not “another silver-spooned movie enthusiast”
“The last thing the company shareholders need is yet another silver-spooned movie enthusiast to run our entertainment company into the ground,” Justin Evans of Blackwood Capital Management wrote in a letter to Paramount’s board.
Blackwood owns more than 135,000 class B and A shares in the company. Evans warned that Paramount would face an “avalanche of litigation” if it mergers with Skydance and insisted that it “immediately engage” with Apollo’s $26 billion offer.
“Now, the Skydance offer you’re contemplating is effectively a sale at the bottom of the cycle in a dilutive transaction that destroys shareholder value, simply because Ms. Redstone is having financial trouble,” Evans wrote.