Mario Gabelli’s next move could be a lawsuit as he probes Paramount’s Skydance merger: sources

Will he, or won’t he?

That’s the question media industry insiders are now asking about Mario Gabelli, a major shareholder in Paramount.

Specifically, the question is whether the mercurial billionaire will file a shareholder lawsuit to stop the Skydance-RedBird buyout team’s purchase of the storied owner of Paramount Studios and CBS and extract a better deal for him and his clients.

As a reporter who has covered the M&A business for decades, I’m always hesitant to report such lawsuits as “big news.” Often, they’re more like ambulance chasing litigation filed by disgruntled fringe investors.

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Clearly, Gabelli is not one of those. He’s one of the best investors in the media space with a track record that spans far longer than I’ve been covering this stuff. He’s a serious man, and if he does pull the trigger on litigation, it won’t be without a good reason.

Securities lawyers who know Gabelli are convinced he’s going to sue . They say he’s been growing increasingly angry over the secret nature of the deal negotiations, how the terms of the deal were hatched without input from investors like him.

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Gabelli owns both the common and the so-called voting shares of Paramount . The latter gives the Redstone family led by Shari Redstone control over the entire company and its various properties – a big Hollywood studio, CBS, MTV, BET and more. He is the largest single holder of the non-voting shares.

Gabelli, for his part, tells On The Money, he hasn’t made up his mind. He was clear to point out that his recent filing in Delaware’s Chancery Court, the go-to venue to settle such disputes — is “not a lawsuit.” It’s more of a request for information.

“I just want full disclosure and I’m asking for information on how they came to the deal terms,” he said.

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Under the terms of the deal, the Redstone family gets $1.75 billion and some degree of legal indemnification if people like Gabelli sue. The common shareholders get a future of promises with Skydance and RedBird putting money into the company and providing new blood in terms of management.

A key problem is that beyond this, no one really knows the terms of the transaction, media industry insiders say. There’s a shop-around-period for the next month. But again, who would bid on this thing – and maybe pay common shareholders more money – without knowing what they’re bidding against?

That’s why one veteran telecom lawyer who advises companies on shareholder lawsuits is bracing for more action.

“I think the soap opera isn’t over,” he said. “The latest filing by Gabelli is a technicality before he sues.”

In other words: Stay tuned for the next episode, in which Gabelli goes to war to extract his pound of flesh.

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