A major Paramount Global shareholder has penned a letter to the media conglomerate’s board urging the company to avoid taking a “suboptimal” bid from David Ellison’s Skydance Media as the two parties have entered exclusivity talks about a possible merger.
The letter comes from Matrix Asset Advisors, which currently owns 355,445 Paramount shares on behalf of its clients and itself and has over $1 billion in assets under management.
The firm says that it firmly believes in the potential for Paramount to “thrive in the evolving media & entertainment ecosystem,” throwing its full support behind CEO Bob Bakish and the board’s turnaround strategy.
“However, we are distressed by recent reports that the Board is strongly considering a suboptimal bid from Skydance that prioritizes the interests of one shareholder over the broader shareholder base. As reported, this deal focuses on monetizing Shari Redstone’s shareholding for cash at a significant premium,” the letter states. “The vast majority of shareholders would not receive a similar premium and would be forced to finance a speculative investment in Skydance in a transaction significantly dilutive to shareholder value. Overall, this transaction, as contemplated, would be detrimental to the company’s value and contrary to the Board’s fiduciary duty.”
Matrix goes on to say that it is “especially galling” that the board has not seriously considered a $26 billion cash offer from Apollo Global due to concerns about deal financing.
“This objection can be cured by giving Apollo the same deference (30 days that is being given to Skydance) to perform diligence and confirm financing. And the valuation certainty of a cash bid is vastly superior to a notional valuation that Skydance is assuming for itself in the second-step transaction, a clear conflict of interest,” the letter adds.
The firm emphasizes that the current rumored deal with Skydance would be a “home run” for controlling shareholder Shari Redstone at the expense of the rest of the company’s non-controlling shareholders and that it would oppose any deal that “dilutes current shareholders or fails to reflect the true value of the company.”
“It is unfortunate that Ms. Redstone finds herself in an urgent need to raise cash at a time when Paramount’s stock is at a low ebb. But her unique problem should not penalize the other 90% of the company’s shareholders,” they added. “We respectfully urge the Paramount Global Board of Directors to reject any proposal that impairs shareholder value and instead to focus on initiatives that enhance the long-term prospects of the company. We also urge the Board to uphold their FIDUCIARY OBLIGATIONS and act in the interest of ALL shareholders, not just Shari Redstone and Skydance. Anything short of that would be a breach of your responsibilities as directors of a publicly traded company, would likely invite shareholder lawsuits, and put a permanent shadow over your tenure as directors of Paramount Global.”
A spokesperson for Paramount declined to comment on the letter, while Skydance and National Amusements did not immediately return TheWrap’s request for comment.
The deal between Skydance and Paramount, 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 Ellison’s father and Oracle cofounder Larry Ellison.
Larry 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 Ellison 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 negotiators are considering a dividend or stock repurchase and eliminating the two-class share structure that gives the Redstone family control with less than 10% of Paramount’s overall stock to get support from its other shareholders (National Amusements owns 77.3% of its Class A (voting) common stock and 5.2% of its Class B common stock). The outlet notes that Skydance would look to merge Paramount+ with a rival, such as Peacock, Max or Prime Video, and would hold on to CBS.
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.” In addition to Skydance and Apollo, Warner Bros. Discovery CEO David Zaslav met with Paramount Global CEO Bob Bakish in December about a potential merger, though those talks have since been halted. Additionally, Allen Media Group founder Byron Allen placed a $30 billion bid including debt for the company, though it’s unclear how that deal would be financed.
Paramount, which reported long-term debt of $14.6 billion as of the end of 2023 and currently has a market capitalization of $7.85 billion, saw its shares dive over 5% during Monday’s trading session.
