Getty Images
Fund manager Mario Gabelli, the largest holder of Paramount Global’s Class A voting stock after Shari Redstone, said he absolutely needs more information about the Skydance transaction than what has been made public so far before he can decide whether he likes the terms.
On Friday, Gabelli sent a letter to Paramount requesting documents to clarify the $2.4 billion that David Ellison’s company and his lenders 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 the voting stock of Paramount Global — which gives a buyer control of the company — as well as the National Amusements movie theater chain and potentially other assets and investments. There was no breakdown in the deal announcement.
“We don’t know exactly how much is being paid for her voting rights in Paramount,” Gabelli told Deadline today.
That’s a problem because the merger terms require all non-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 shares for 1.53 shares of non-voting Class B 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 they [Redstone] gets $40, and I get $23, that’s a problem. If she gets $26 and I get $23, um, what’s $3 a share to them? … They’re not going to fight over $3 a share. OK? They’re clearly going to bid low and then they’re going to have to deal with individuals like me who are arm wrestling.”
“I’m basically saying, look, tell us what Skydance paid for the various parts of National Amusements? … That’s why I want books and records. Because I know Shari has invested in venture capital opportunities in the past, but I can’t say whether that’s another pocket of her money, or whether it’s a portion of National Amusements’ money. I just don’t know.”
Gabelli has been investing in Paramount Global and its various derivatives for years and says he is investing for the long term and is not comfortable giving up his Class A shares.
“We’re like marathon runners, okay. We want to hold on to our Paramount stock. We don’t want to be forced to sell our stock, as they describe it… You 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’s something I don’t like either. They’re really trying to force me out of a position to take a position on the next phase of this transaction.”
The letter requesting board meeting records and other information is allowed by the Delaware Chancery court, but does not itself constitute a lawsuit. Companies have five business days to respond.
“There’s a window of time where they’ll respond, but they can tell you, ‘We’re not going to give you anything.’ Then we have to sue them. We’re not prepared for that. So if they come in and say, ‘I need more time,’ which is possible — I heard today that they might want to extend it to the end of July” — practically speaking, he indicated, that’s probably OK.
He is strategically quite positive about the Paramount-Skydance deal, as he believes Skydance will bring more scalability and a boost in technology and AI, and that content of all kinds has a bright future.
As for Class B shareholders, who are far more numerous than Class A, they’re not happy with the deal, which offers them $15 a share for a chunk of their stock. Their complaint is that a second step in the transaction (after Skydance buys National Amusements) would mean Paramount would acquire Skydance in an all-stock deal worth $4.75 billion. Issuing the new B shares would dilute the holdings of current shareholders and is why Paramount stock is trading between $11 and $12 — not $15. A few said they expect long-pending lawsuits from Class B holders to emerge.
RELATED: Sony Won’t Return to Mixing During Paramount’s 45-Day ‘Go Shop’ Window
Skydance’s original deal did not include a buyout for Paramount shareholders other than Redstone, but the offer was refined several times to entice them to participate.
The two parties agreed to a “go shop” arrangement until August 21, allowing other interested parties to make offers for Paramount.