Paramount investor Scott Baker, who previously filed a proposed class action lawsuit in the Delaware Court of Chancery alleging the company’s pending $8 billion merger with Skydance could cost shareholders $1.65 billion in damages, is vying to be the lead plaintiff on the case.
But funds led by the California State Teachers’ Retirement System (CalSTRS) argued in a new filing that the total damages to shareholders could be much greater than that and that Baker “demonstrates a lack of financial sophistication in evaluating the fairness of the price.”
“The $15/share figure that Baker assumes to be the true, fair value is merely the nominal value the parties assigned to the consideration offered to Paramount’s Class B stockholders,” CalSTRS wrote in the Oct. 17 complaint. “As Baker’s complaint acknowledges elsewhere, Apollo and Sony reportedly made a $26 billion all-cash offer to buy Paramount in May 2024. Without delving into the math for present purposes, under any reasonable assumptions, that offer implied a significantly higher value for Paramount’s Class B than the $15/share figure that Baker uses, and, thus, much greater potential damages.”
The pension fund also noted that Baker raced to the courthouse without conducting a books and records investigation, based his facts solely on public information and doesn’t account for what controlling shareholder Shari Redstone and National Amusements are receiving for their Class A and B shares.
“This is a critical data point in evaluating the fairness of the Skydance transaction and precisely the type of question that stockholders should try to answer through a pre-suit investigation before filing a plenary action that commits to a damages number,” CalSTRS added.
The group further argued that Baker is not an appropriate representative to lead a class action lawsuit on the matter and is seeking to dismiss his suit to give other investors more time to conduct their own investigations before heading to court.
“Conducting a diligent pre-suit investigation is far more commendable than fast filing. If dispersed stockholders could act collectively after corporate trauma, they would not rush to court,” they wrote. “The Court should deny the Baker Group’s motion without prejudice and wait to resolve leadership until after other stockholders are able to complete their pre-suit investigations.”
The Skydance deal, which is slated to close in the first half of 2025, has faced pushback from investors over concerns that it would prioritize Redstone at the expense of Paramount’s minority shareholders.
CalSTRS — the second largest U.S. public pension fund with nearly $350 billion in assets — and Mario Gabelli — the largest class A Paramount shareholder behind Redstone whose GAMCO Investors Inc. represents clients that own 5 million Class A shares and 1 million Class B shares — have each filed books and records requests to look into the finer details of the transaction. While not technically a lawsuit in itself, the moves could be an early indicator of lawsuits to come.
Meanwhile, the Employees’ Retirement System of Rhode Island has asked the Delaware court to order Paramount to turn over documents and communications related to its talks with Skydance, due to concerns that Redstone was interfering with the board’s ability to find the best deal for shareholders. That request was rejected in August, but the magistrate’s decision will be reviewed by a more senior judge in November.
Baker has argued that preliminary investigations from CalSTRS and Rhode Island would only drag out the process. Bloomberg was the first to report the new filing.
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