An investment firm has criticized plans by Paramount Global’s board of directors to explore a possible merger of the company with Skydance Media on an exclusive basis.
In a letter sent to the board of directors on Monday, the Chief Financial Officer of Matrix Asset Advisors says the deal stands to substantially benefit Paramount’s parent company National Amusements and its controlling owner, Shari Redstone, over smaller investors who might be forced to bankroll what he called a “speculative investment in Skydance in a transaction significantly dilutive to shareholder value.”
The letter followed numerous media reports published over the last two weeks that said the board of Paramount was focused squarely on a proposed merger of its entertainment business with Skydance, the media production firm owned by David Ellison. Over the weekend, CNBC said the deal would involve other stakeholders, including RedBird Capital Partners, and could see former NBC Universal CEO Jeff Shell — who currently serves as the head of RedBird’s sports and media investment business — take an executive role at the combined company.
DOCUMENT: Read the letter sent by Matrix Asset Advisors to Paramount’s board [Pro Access]
The potential transaction comes at a time when investors have pressured Paramount and its parent company, National Amusements, to look for ways to reduce its debt and operating costs while maximizing potentials from its intellectual property and streaming businesses, including its direct-to-consumer product Paramount Plus with Showtime.
On Monday, Matrix Assets Advisors CFO David Katz wrote that some of those objectives will be met if Paramount continued on its current course of cost-cutting with an eye toward expanding its revenue streams due to “dramatic changes in the video entertainment market,” which has the potential to “significantly bolster shareholder value over the next 12 to 18 months.”
But shareholders like Matrix Asset — which controls more than 355,000 shares of Paramount on behalf of itself and its clients, with a market value of over $4 million — might get the short end of any deal involving Skydance and Paramount as investors would be expected to subsidize the transaction that would benefit Redstone more than anyone else, Katz complained.
“As reported, this deal focuses on monetizing Shari Redstone’s shareholding for cash at a significant premium,” Katz wrote in the letter. “The vast majority of shareholders would not receive a similar premium, and would be forced to finance a speculative investment in Skydance in a transaction significant dilutive to shareholder value.”
“Overall, this transaction, as contemplated, would be detrimental to the company’s value and contrary to the Board’s fiduciary duty,” Katz affirmed.
Katz went on to complain that Paramount appeared to pick the Skydance deal over other offers, including one made by Apollo Global Management that would have reportedly involved spending around $26 billion in cash to acquire all of Paramount. According to reports, the Paramount board felt Apollo Global would have trouble financing the transaction, but Katz said those concerns could have been overcome if the board gave Apollo Global the same 30-day window to “perform diligence and confirm financing” as it is now giving Skydance.
“We urge the board to exercise its fiduciary responsibility and obligation by prioritizing actions that serve the best interest of ALL Paramount shareholders,” Katz wrote. “It is imperative that any proposed transaction be thoroughly evaluated to ensure it maximizes shareholder value, as compared to other potential deals or the status quo.”
