Billionaire money manager Mario Gabelli is ramping up scrutiny of Skydance’s deal to take control of Paramount Global.
In a petition to the FCC, Gabelli urged the commission not to transfer control of broadcast licenses held by Shari Redstone’s National Amusements to Skydance until he decides whether to sue for breach of fiduciary duty. He claimed Paramount has failed to properly disclose the process leading up to board approval of the merger and the fairness of the deal for investors, who allegedly continue to be deprived of information relating to the possibility that “consideration that should be paid to them is being diverted” to National Amusements for its controlling stake in the company.
“We further note that the transaction is not subject to a vote by minority stockholders and minority shareholders are only being offered non-voting shares in post-Merger Paramount,” stated the petition, filed on Nov. 8. “This disenfranchises Class A holders who currently have voting rights and leaves the operation of these important media assets essentially unchecked.”
As part of the merger, class A shareholders will receive $23 per share, while class B nonvoting shareholders will receive $15 per share. Gabelli, the largest holder of nonvoting shares, seeks information related to whether Redstone, who owns both voting and nonvoting shares, will get more money for her Class B shares than others. In a much-expected revolt over treatment of minority investors, Gabelli filed a lawsuit in Delaware Chancery Court in July for access to Paramount’s books in what could be a precursor to a lawsuit challenging the deal that some investors believe enriches controlling shareholder Redstone at their expense.
Paramount holds, through various subsidiaries, broadcast licenses for 28 local television stations owned by the CBS Television Network. Skydance and National Amusements have filed applications seeking approval to transfer control of those licenses from various trusts controlled by Redstone to companies owned by Larry and David Ellison, who will hold complete ownership of the family’s voting interest in Paramount if the deal closes.
In last week’s filing, Gabelli moved for the FCC to defer approval until he’s decided whether to sue Paramount’s Board of directors, National Amusements and Skydance for breach of fiduciary duty under claims that the deal violates federal law.
“The potential fiduciary and/or federal securities violations which are the subject of Gabelli Value’s investigation may have wide-reaching consequences for the Company and existing minority shareholders,” the filing stated.
Gabelli’s legal salvo in July revolves around the possibility that National Amusements is pursuing a deal with Skydance to maximize the price paid for its controlling interest in Paramount while undercutting public stockholders. It pointed to competing bids by Allen Media Group, which allegedly offered $14.3 billion to buy all Class A voting and Class B nonvoting shares, and Apollo Global Management, which allegedly twice offered $26 billion to buy Paramount, most recently in a joint bid with Sony that included taking on the company’s $14.6 billion debt load.
Skydance, meanwhile, proposed a much more complex transaction that maximized National Amusement’s return, according to the lawsuit. There’s a “credible basis to suspect” that the independence of the committee of directors formed to evaluate the deal is “compromised,” Gabelli claimed.