Paramount Shareholder Aspen Sky Trust Urges Board to End Exclusive Talks With Skydance
Paramount shareholder Aspen Sky Trust has joined Matrix Asset Advisors in its opposition of the current exclusive talks with David Ellison’s Skydance Media regarding a potential acquisition of the company through Shari Redstone’s National Amusements.
“The dilution of shareholder valuation to advance the position of a single shareholder with a position on the Board of Directors, as currently being reported, is more than questionable. At a minimum, it transcends ethical boundaries and breaches the fiduciary duties the Board of Directors owes to its shareholder base,” Aspen’s legal counsel The Riley Firm sent in a letter to the board on Tuesday.
“Specifically, we find that the actions taken by Paramount’s Board of Directors in halting discussions with or otherwise denying viable bidders the courtesy of a 30-day due diligence inspection period (during which funding would be confirmed), while offering this courtesy exclusively to Skydance Media, is a per se violation of the Board’s fiduciary duties to its shareholders,” the letter continued.
The firm, which owns 6,574,397 Paramount shares amounting to nearly 1.3% of the total reported float of shares trading and more than 1% of the total shares issued, argues that the Skydance bid places the company’s shareholders into a “hyper speculative business arrangement with the Redstone family at the helm while the remaining 90% of shareholders are left floating without life rafts.” They also note that competing bids from Apollo Global Management and Allen Media Group founder Byron Allen “do not include anywhere near the same reward-risk scenario.”
The Riley Firm is calling on the board to abandon its exclusive talks with Skydance and to engage in competitive bidding negotiations.
“Any merger discussions and/or transactions that systematically foregoes competitive bidding in favor of exclusive discussions with a single company – especially where that bidder is offering to promote the financial position of a single shareholder over that of the general base — is averse to the fair market valuation of the company,” the letter argues. “Such a result would, at a minimum, provide cause to investigate the ethical motives underlying the transaction. Assuredly, such a result would expose Paramount to liabilities for investor losses based on breaches of fiduciary duties (among other obligations), potential personal liability exposure of the Board of Directors engaging in this reprehensible behavior and should spark security compliance investigations.”
It also asks that the board forego discussions with any future bidders that would “propose instant rewards for one or a few interested parties while saddling the remaining shareholders with all the risk or, even more concerning, unbridled dilution of value as presented in the current set of circumstances.”
Skydance, which is valued at more than $4 billion, has been a co-producer with Paramount on projects such as the “Mission: Impossible” franchise and “Top Gun: Maverick.” Its deal, which CNBC reported would include raising new equity and an ownership stake of somewhere between 45% to just over 50%, would be financed with the help of a consortium of investors, including private equity firms RedBird Capital Partners and KKR, as well as Larry Ellison, Ellison’s father and Oracle’s cofounder.
The senior Ellison would reportedly put up some of the new funding and potentially provide Paramount with access to artificial intelligence software and other data technology from Oracle. David, meanwhile, would likely lead the new company, while former NBCUniversal CEO Jeff Shell would also have a major leadership role. Additionally, management would reportedly be open to divestitures of assets, such as BET Media Group. Bloomberg separately reported that Skydance would look to merge Paramount+ with a rival, such as Peacock, Max or Prime Video, and would hold onto CBS.
Redstone’s National Amusements could receive over $2 billion in cash from the Skydance deal, according to The Wall Street Journal. Skydance would reportedly be acquired in an all-stock deal valued at around $5 billion.
In addition to Skydance, Paramount Global CEO Bob Bakish met with Warner Bros. Discovery CEO David Zaslav in December about a potential merger, though those talks have since halted. Allen placed a $30 billion bid including debt for the company, though it’s unclear how that deal would be financed, and Apollo has placed a $26 billion all-cash offer, which was reportedly rebuffed due to concerns around how the bid would be financed.
In addition to Matrix and Aspen Sky Trust, Blackwood Capital Management, which owns an aggregate of 122,000 Paramount class B shares and 13,600 class A (voting) shares, slammed the Skydance deal in a separate letter sent to the board on Monday.
“If you believe that the proposed Skydance deal is truly a better offer, then the only way to avoid litigation is to provide to all current shareholders the option to sell their shares at the same price as Ms. Redstone,” Blackwood wrote. “The last thing the company shareholders need is yet another silver-spooned movie enthusiast to run our entertainment company into the ground.”
Paramount, which had a market capitalization of $7.6 billion as of Tuesday’s close and a reported $14.6 billion in debt at the end of 2023, has seen its shares fall 23.8% year to date and 11.7% in the past six months.
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