Matrix Asset Advisors Slams Paramount Over Bob Bakish Exit: ‘Everything About Today’s Update Is a Disgrace’

Matrix Asset Advisors slammed Paramount Global on Monday after it announced CEO Bob Bakish would depart the company amidst ongoing merger talks with David Ellison’s Skydance Media.

The firm, which owns which owns 355,445 Paramount shares on behalf of its clients and itself and has over $1 billion in assets under management, also criticized the company for not providing guidance or answer analysts questions during its first quarter earnings call.

Chief investment officer David Katz told TheWrap that Bakish is being “removed because he was fighting for an equitable deal for all shareholders rather than for doing a one-sided deal for Redstone at the expense of the other 90% of the shareholders.”  He argued that the move was “solely motivated” by controlling shareholder Shari Redstone because he wouldn’t roll over and say the [Skydance] deal was a good deal.”

“His exit puts the company in a greater crisis and forces the board’s hand to do something as they no longer have a world-class CEO. They “shot the pilot while landing the plane” and will now say we need to take action as we need someone to pilot the plane,” Katz added. “This is a major unforced error that will cost the company upwards of $50 million according to reports, plus a massive lack of leadership during a critical period for the company.”

Katz acknowledged that the company had a “good quarter” with focus on improving cash flow and earnings and subscriber growth that came in better than expectations.

“Bakish continued to deliver on the plan he laid out,” Katz said. “The plan is working, and Paramount is a very undervalued, high quality media asset. The turnaround seems to be taking hold.”

He said that the first quarter earnings results reinforce Matrix’s belief that a sale to Skydance “makes no sense” and only benefits Redstone with “enormous dilutive impact on all other shareholders.” He also said that Paramount going it alone and letting the turnaround take place is “a lot better” for shareholders than selling to Skydance and that a “full and open sale process” would likely result in much higher price to shareholders.

In addition to Skydance, Apollo Global Management made a $26 billion all-cash offer, which was reportedly rebuffed due to concerns around the financing of its bid. The private equity firm has since entered talks with Sony about potentially making a new joint bid, though no offer has formally been made.

“There is no value in being exclusive with Skydance,” he added. “The current quarter’s performance should make Paramount more attractive to Sony/Apollo.”

Additionally, Katz knocked management for refusing to take questions or providing guidance during the earnings call.

“Redstone and the board have absolutely no regards for 90% of the shareholders and are solely acting to get as much money for Redstone and National Amusement and are willing to sacrifice the company and the public shareholders,” he said. “Everything about today’s update is a disgrace relative to the action that Redstone and the board are taking. The fact that the call did not permit any questions from analysts and had no forward outlook makes it clear that Redstone has no intention of paying attention to the shareholder rejection of her deal.”

In addition to Matrix, Ariel Investments, Aspen Sky Trust and Blackwood Capital Management have all expressed opposition to the bid, argued that Skydance’s bid prioritizes the interests of Redstone over the rest of Paramount’s shareholders and would dilute their own holdings.

Ariel’s founder and chairman John Rogers Jr., whose firm had a 1.8% stake in Paramount as of the end of 2023, and GAMCO Investors Inc. chairman and CEO Mario Gabelli, who owns 5 million voting shares, have also both previously warned that they could pursue litigation if the Skydance deal or any other bid does not appropriately benefit their clients.

The two-step deal would see Skydance acquire the company through controlling shareholder Shari Redstone’s stake in National Amusements, which owns 77% of Paramount voting stock. The second step would see Skydance and Paramount merge to create a combined company valued at around $5 billion.

The deal for Paramount must be approved by the board’s independent special committee. Earlier this month, Paramount revealed four board members would not seek reelection at the company’s June 4 annual meeting — including three who were on the special committee.

Under a newly revised offer, Skydance would include $3 billion cash injection as well as premium sweetener for a percentage of non-voting Class B shares in an effort to assuage minority shareholders’ concerns, an individual familiar with negotiations tells TheWrap.

Redstone, who is already set to get a premium for her shares, could take less cash and keep more equity in Paramount under one scenario being discussed. She has also agreed to give non-voting, minority shareholders a say in whether any transaction gets approved.

While acknowledging the positive of giving shareholders a say on the deal, Katz argued that it is still “massively sub-par” and dilutive and that shareholders are still “near universally negative” on the offer.

“Paramount is paying a very inflated price for Skydance and they are paying off Shari Redstone and getting control of the company, so Skydance has a lot of excess funds to put into buying Paramount stock from the company at a premium to current prices and it’s still a massive win for them,” he said. “Firing Bakish maybe throws the company in a new crisis, so the pitch would be take the Skydance deal cause at least we get a CEO and otherwise we are in trouble. We have no CEO and are rudderless. If all shareholders need to approve the deal, we are hard pressed to see them winning that vote, even with this take or it will be worse pitch.”

Exclusive discussions with Skydance are set to expire on May 3. It is currently unclear if those talks will be extended.

Paramount’s board, which met over the weekend to discuss Bakish, were upset with the executive over over his decision not to divest assets such as Showtime and BET Group and for not going far enough to cut costs, two insiders familiar with the discussions told TheWrap on Saturday.

Bakish will be replaced by an Office of the CEO run by three senior executives: George Cheeks, CBS CEO and president; Chris McCarthy, Showtime/MTV Entertainment Studios and Paramount Media Networks CEO and president; and Brian Robbins, Paramount Pictures and Nickelodeon CEO and president. Backish will remain employed as “a Senior Advisor” from May 1 through Oct. 31 to assist with the transition, according to a company filing Monday.

Paramount shares have fallen 47% in the past year and 14.9% year to date, but are up 11% in the past six months. The stock closed Monday at $12.25 apiece, up from the 52 week-low of $10.12 per share hit earlier this month. As of Monday’s close, Paramount had a market capitalization of $8.6 billion.

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