Ariel Investments has weighed in on Paramount’s ongoing merger talks with Skydance Media, and the longtime studio investor would like to see things opened up to competitive bids.
The firm, which is a long-term shareholder with a 1.8% stake in Paramount as of the end of 2023, told TheWrap that any talks that “forego competitive bidding in favor of an exclusive discussion with a single buyer, particularly where the reported control premium differentiates the financial position of a single shareholder over all other shareholders, is averse to the fair market value of a company.”
A deal from Skydance would have to be approved by Paramount’s special committee of independent directors. Three of the independent committee’s members — Dawn Ostroff, Nicole Seligman and Frederick Terrell — and Redstone’s longtime attorney Rob Klieger will not stand reelection at Paramount’s annual meeting on June 4.
The board will be reduced to a total of 7 directors, including Paramount’s non-executive chairwoman Shari Redstone, CEO Bob Bakish, Barbara Byrne, Linda Griego, Judith McHale, Charles E. Phillips, Jr., and Susan Schuman. Redstone has notably recused herself from Paramount’s independent special committee.
“We would like to have faith the independent directors of Paramount Global will uphold their fiduciary duty and ensure any negotiated deal structure and terms are good for all shareholders,” an Ariel spokesperson continued. “But our concerns were further heightened by today’s rumors of changes at the board level that may compromise the board’s ability to act on behalf of all shareholders.”
Ariel, which was founded in 1983 by value investor and long-time Fortune 500 corporate board member John W. Rogers, Jr., currently manages roughly $15 billion in assets.
Its statement comes as various investors have penned letters to Paramount’s board and its controlling shareholder Shari Redstone to express their opposition to the Skydance bid. Though many of the letters have focused on the company’s decision to reportedly rebuff a $26 billion all-cash offer from Apollo Global Management, Ariel noted that it is focused on “the belief that shareholders would benefit from a thorough review of all strategic alternatives. “
Matrix Asset Advisors, which currently owns 355,445 Paramount shares, argues that the “sub-optimal bid” prioritizes “the interests of one shareholder over the board shareholder base” and would be “detrimental” to the company’s value. It added that it is “especially galling” that the board has not seriously considered Apollo’s offer due to concerns about deal financing.
Aspen Sky Trust, which owns approximately 6.57 million shares, has urged Paramount to abandon its exclusive talks with Skydance and pursue competitive bidding negotiations. It accused the board of violating its fiduciary responsibility by denying other viable bidders a 30-day due diligence period and asked that they forego discussions with any future bidders that would “propose instant rewards for one or a few interested parties while saddling the remaining shareholders with all the risk or, even more concerning, unbridled dilution of value as presented in the current set of circumstances.” Additionally, Aspen has sent a cease and desist letter to Redstone threatening legal action if she does not “send written confirmation” that she “will cease-and-desist from all breaches of fiduciary duties,” before 5:00 PM Eastern on Friday.
A Reddit community of investors, who own a combined 1 million shares of Paramount’s class B stock said they are “deeply disturbed by recent reports indicating a potential merger with Skydance Media” and called the bid a “slap in the face to those of us who have remained committed to Paramount through challenging times.”
Blackwood Capital Management, which owns an aggregate of 122,000 Paramount class B shares and 13,600 class A (voting) shares, warned that the company would face “an avalanche of litigation” and that their “reputations will be soiled by this ugly chapter” if they chose to move forward with Skydance’s “toxic unfair proposal.”
“If you believe that the proposed Skydance deal is truly a better offer, then the only way to avoid litigation is to provide to all current shareholders the option to sell their shares at the same price as Ms. Redstone,” it added. “The last thing the company shareholders need is yet another silver-spooned movie enthusiast to run our entertainment company into the ground.”
Skydance, which is valued at more than $4 billion, has been a co-producer with Paramount on projects such as the “Mission: Impossible” franchise and “Top Gun: Maverick.”
Its deal, which CNBC reported would include raising new equity and an ownership stake of somewhere between 45% to just over 50%, would be financed with the help of a consortium of investors, including private equity firms RedBird Capital Partners and KKR, as well as Larry Ellison, Ellison’s father and Oracle’s cofounder.
The senior Ellison would reportedly put up some of the new funding and potentially provide Paramount with access to artificial intelligence software and other data technology from Oracle. David, meanwhile, would likely lead the new company, while former NBCUniversal CEO Jeff Shell would also have a major leadership role. Additionally, management would reportedly be open to divestitures of assets, such as BET Media Group. Bloomberg separately reported that Skydance would look to merge Paramount+ with a rival, such as Peacock, Max or Prime Video, and would hold onto CBS.
Redstone’s National Amusements could receive over $2 billion in cash from the Skydance deal, according to The Wall Street Journal. Skydance would reportedly be acquired in an all-stock deal valued at around $5 billion.
In addition to Skydance and Apollo, Paramount Global CEO Bob Bakish met with Warner Bros. Discovery CEO David Zaslav in December about a potential merger, though those talks have since halted. Allen Media Group founder Byron Allen also placed a $30 billion bid including debt for the company, though it’s unclear how that deal would be financed.
Paramount, which had a market capitalization of $7.7 billion as of Friday’s trading session and a reported $14.6 billion in debt at the end of 2023, has seen its shares fall 23% year to date.
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