
A minority shareholder of Paramount Global has filed a proposed class-action lawsuit against Skydance Media, National Amusements and several senior executives over their pending three-way merger.
The case, filed in Delaware’s court of chancery last Wednesday, argues that Skydance’s intent to buy out National Amusements, then immediately merge with Paramount, stands to substantially benefit National Amusements owner Shari Redstone and Skydance CEO David Ellison, while leaving Paramount’s common shareholders saddled with the bill.
The complaint has resonated among some of Paramount’s minority shareholders over much of the past year, while Skydance and Paramount were engaged in exclusive pre-merger discussions on the matter. Now, one Paramount shareholder — Scott Baker — is taking the matter to court.
In Baker’s view, the primary goal of the three-way arrangement is to allow Redstone to cash out her family’s investment in Paramount in a way that devalues the company’s Class B shares for everyone else.
According to the complaint filed last week, Paramount’s Class B shareholders face over $1.6 billion in damages, while Redstone receives a “premium” for her share of the company.
Document: Read the complaint filed in Baker v. Redstone, et. al. [Pro access]
“While Defendants present that the Merger will pay Class B shareholders $15 per share, there is not enough cash in the deal to buy out all of the non-NAI Class B shares,” the complaint reads, using the initialism for National Amusements. “Instead, these shareholders will get a mix of cash and Class B stock in the merged entity, ‘New Paramount.’ That payout is only worth $12.23 per Paramount Class B share. Thus, when the Merger closes, the non-NAI Class B shareholders will suffer $1.645 billion in damages, as explained herein.”
The lawsuit comes at a time when Paramount and Skydance are still engaged in a “go-shop” period, where other individuals and companies may express interest in acquiring some or all of the famed movie studio and its related properties, including television networks CBS, MTV and Nickelodeon.
Despite the window, Skydance executives have already spoken publicly about how they intend to operate Paramount once the deal closes, suggesting it may already be a done deal and that the “go-shop” period is merely a formality.
To that end, Skydance has already revealed that former NBC Universal executive Jeffrey Shell is expected to serve as the CEO of “New Paramount,” the named of the merged venture. Shell participated in a conference call with investors and shareholders in early July, offering his thoughts on how Paramount will proceed once the merger with Skydance closes.
“Obviously a big chunk of the company is in the linear world — and we know that linear is challenged and declining,” Shell said on the call. “I think a lot of us in the business know we’ve got to run these businesses in a different way as they decline.”