Fund manager Mario Gabelli, the biggest holder of Paramount Global Class A voting shares after Shari Redstone, said he absolutely needs more information on the Skydance transaction than what’s been publicly disclosed before he can decide if he likes terms.
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On Friday, Gabelli sent a letter to Paramount asking for records to give clarity to the $2.4 billion that David Ellison’s company and its backers agreed to pay Redstone for her family holding company National Amusements under the merger agreement announced a week ago. NAI’s assets include about 80% of Paramount Global’s voting stock — giving a buyer control of the company — but also the National Amusements movie theater chain and, possibly, other assets and investments. There was no breakdown in the deal announcement.
“We don’t know the details of how much is being paid for her voting control of Paramount,” Gabelli told Deadline today.
That’s an issue because the merger terms require all outside Class A shareholders like Gabelli and hundreds of his clients to tender their Class A shares for $23 each, or exchange each of their Class A share owned for 1.53 shares of Class B non-voting stock.
“I’m not happy or unhappy,” Gabelli told Deadline. “I’m just focused as a fiduciary on doing the best for my clients. If she [Redstone] gets $40, and I get $23, that’s a problem. If she gets $26 and I get $23, eh, what’s $3 a share for them? … They’re not going to argue over $3 a share. Okay? They’re going to clearly bid low and then have to deal with individuals like me that are going to arm wrestle.”
“I’m basically saying, look, tell us what did Skydance pay to for the various parts of National Amusements? … That’s why I want books and records. Because I know that Shari has invested in venture capital opportunities in the past, but I can’t tell whether that’s another pocket of her money, or is that a part of National Amusements’ money. I just don’t know.”
Gabelli’s been invested in Paramount Global and its various iterations for years and says he’s in for the long term and doesn’t like being forced to give up his Class A stock.
“We’re like marathon runners, okay. We want to keep our holdings of Paramount. We would not like to be forced out of our holdings, the way they’re describing … You guys take $23 or you take 1.53 [Class B shares]. I don’t like that. I want to see what she got. And then we can talk about what you want to pay me.”
“That is something I also don’t like. They’re really trying to force me out of the position of having a point of view on the next phase of this transaction.”
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The letter requesting records of board meetings and other information is allowed by Delaware Chancery Court but does not itself constitute a lawsuit. Companies have five business days to respond.
“There is a time period in which they respond, but they can tell you, ‘We’re not going to give you anything.’ So then we’d have to go sue them. We have not prepared to do that. So, if they come in and say, ‘I need some more time,’ which is possible — I heard today, they may be looking to extend the timeframe to the end of July” — practically speaking, he indicated, that’s probably okay.
He is relatively okay with the Paramount-Skydance deal strategically in the sense that he believes Skydance adds scale and a boost in tech and AI, and that content of all kinds has a bright future.
As for the Class B shareholders, of which there are many more than Class A, they are not happy with the deal, which is offering them $15 a share for some of their shares. Their gripe is that a second step in the transaction (after Skydance buys National Amusements) would see Paramount acquire Skydance in an all-stock deal valued at $4.75 billion. Issuing the new B shares would dilute the holdings of current stockholders and is why Paramount shares are trading between $11 and $12 – not $15. A few said they expect long-threatened lawsuits from Class B holders to start appearing.
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Skydance’s original deal didn’t include any buyout for Paramount shareholders beyond Redstone but the offer was sweetened several times to try to get them on board.
The two sides agreed to a “go shop” provision through August 21 for any other interested parties to make an offer of Paramount.
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