Paramount Global shareholder Mario Gabelli is asking the Federal Communications Commission to pause its review of the transfer of broadcast licenses in connection with the company’s $8 billion merger with Skydance Media as he investigates “potential fiduciary and/or federal securities violations” against the media giant’s minority shareholders.
Gabelli’s investment firm owns approximately 12.5% of Paramount’s Class A common stock — the second largest Class A shareholder behind Shari Redstone and National Amusements — and approximately 900,000 Class B shares.
The latest request comes after he filed a books and records request to learn more about the finer details of the Skydance deal, including how much Redstone will receive for her A shares.
“I want my clients to have the option of continuing to own the voting shares. Why should they get squeezed out? That is not clear,” Gabelli previously told TheWrap in July. “Secondly, are they worried I would discover a whole bunch of numbers that would indicate that they should get more money because the other guy got more money? I don’t know.”
On Nov. 4, Paramount filed a 669-page S-4 prospectus with the U.S. Securities and Exchange Commission about the Skydance deal, which Gabelli says does not adequately disclose the process leading up to board approval of the merger or the fairness of the merger consideration.
He added that it doesn’t provide any disclosure that would enable shareholders to ascertain whether consideration that should be paid to them is being diverted to NAI for its controlling stake in the company. NAI controls 77.4% of the Paramount Class A common stock outstanding and approximately 9.5% of the overall equity of the company.
Additionally, Gabelli pointed out that the transaction is not subject to a vote by minority shareholders, who are only being offered non-voting shares post-merger, which “disenfranchises Class A holders who currently have voting rights and leaves the operation of these important media assets essentially unchecked.”
“The potential fiduciary and/or federal securities violations which are the subject of Gabelli, reaching consequences for the Company and existing minority shareholders and, respectfully, should be considered by the Commission before it acts on the application for approval of the transfer of control of Paramount,” the letter concludes. “Accordingly, Gabelli Value respectfully requests that the Commission defer resolution of the application until Gabelli Value has completed its inquiry and determined whether to initiate litigation against Paramount’s board of directors, NAI and/or Skydance for breach of fiduciary duty (or aiding and abetting) under Delaware law and/or whether the transaction violates federal law. We are available to discuss this matter at your convenience.”
An FCC spokesperson declined to comment on pending transactions. Representatives for Paramount also declined, while the special committee did not immediately return TheWrap’s request for comment.
In addition to Gabelli, other shareholders have called out the deal, including Scott Baker, who has filed a proposed class-action lawsuit arguing the Skydance deal could cost shareholders $1.65 billion in damages, as well as the California State Teachers’ Retirement System (CalSTRS), which believes the damages could exceed that figure.
Meanwhile, the Employees’ Retirement System of Rhode Island has asked a 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.
Shares of Paramount, which closed at $11.45 apiece on Tuesday, have fallen 4.5% in the past year and 20.49% year to date.
