Paramount Shareholder Aspen Sky Trust Decries Skydance Agreement as ‘Undervalued Bid’ That Only Benefits Shari Redstone

Paramount shareholder Aspen Sky Trust decried reports of a Skydance agreement to acquire the media conglomerate on Monday as an “undervalued bid” that only benefits non-executive chair Shari Redstone “to the detriment of nearly all remaining shareholders.”

The firm, which owns approximately 6.57 million shares in the company, sent a third letter of opposition Monday, sent and signed by William W. Riley, Jr., Esq. on behalf of his client.

“Despite the vocalization of our concerns and those of similarly concerned shareholders, today it was widely reported that a merger agreement has been reached by Paramount Global and Skydance Media. Few details of the merger agreement are available to company shareholders, including my client,” the letter read.

The missive continued, saying that what has been reported of the deal indicates an “undervalued bid to merge with Skydance Media that would promote the financial position of Paramount’s non-executive chair, Shari Redstone, to the detriment of nearly all remaining shareholders,” and that such a deal would be “rubber-stamped approved without the benefit of a shareholder vote.”

“The dilution of shareholder valuation to advance the position of a single shareholder with a position on the Board of Directors is a per se violation of the Board’s fiduciary duties to its shareholders,” the letter read. “Once the details of the deal are made available to the shareholder base, we would not be surprised to learn of additional violations of the law concerning this merger agreement.”

The offer in question was backed by RedBird Capital and KKR as well as by the media conglomerate’s independent special committee. It would give Redstone $2 billion for National Amusements, which owns 77% of Paramount’s class A voting stock and 5.2% of its class B common stock. The second step would see Skydance merge with Paramount to create a combined company.

The deal, which does not require a vote from shareholders, would also see Skydance and RedBird contribute $1.5 billion in case to help reduce debt. Skydance would also buy out nearly 50% of class B Paramount shares at $15 apiece. Upon closing, Skydance and RedBird would own two thirds of Paramount, and class B shareholders would own the remaining third.

Paramount will hold is annual shareholder meeting on Tuesday. Four members of the board of directors will step down at that time.

Sony Pictures Entertainment and Apollo Global Management previously submitted a joint $26 billion all-cash offer for the company. This plan would have the former take a majority stake and operational control, and the latter would take a minority stake. The bid followed a rejected offer by Apollo to solely acquire Paramount Pictures. While the pair signed NDAs to begin discussions with Paramount, The New York Times reported that they have since backed away from the original offer.

The Wall Street Journal  also reported that Hollywood producer Steven Paul has lined up approximately $3 billion to finance a potential takeover of National Amusements.

The full letter reads:

“Dear Directors,

This correspondence serves as our third letter of opposition to the reported merger by and between Paramount Global and Skydance Media. As you certainly know by now, my client—Aspen Sky Trust—owns 6,574,397 shares of Paramount Global stock, which is nearly 1.3% of the total reported float and more than 1% of the total shares issued.

My client has repeatedly urged the Board of Directors to engage in competitive bidding negotiations and abandon its current path of exclusive discussions with any one company, especially one where a Board member holds a heightened financial interest. We reiterate our statement that 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. 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. My client certainly plans to pursue all legal remedies afforded to him if those unfortunate circumstances arise.

Despite the vocalization of our concerns and those of similarly concerned shareholders, today it was widely reported that a merger agreement has been reached by Paramount Global and Skydance Media. Few details of the merger agreement are available to company shareholders, including my client. What has been reported is that Paramount Global has accepted an undervalued bid to merge with Skydance Media that would promote the financial position of Paramount’s Non-Executive Chair, Shari Redstone, to the detriment of nearly all remaining shareholders. What has also been reported is that this alarming deal is one that has been concocted and will apparently be rubber-stamped approved without the benefit of a shareholder vote. The dilution of shareholder valuation to advance the position of a single shareholder with a position on the Board of Directors is a per se violation of the Board’s fiduciary duties to its shareholders. Once the details of the deal are made available to the shareholder base, we would not be surprised to learn of additional violations of the law concerning this merger agreement.

My client will investigate this matter to fully understand each ingredient that went into this deal and full intends to pursue all legal avenues available to it. In the interim, we are copying the U.S. Securities and Exchange Commission and are asking that it also investigate the legalities of this reported merger on behalf of our client and for the benefit of all adversely impacted shareholders.”

More to come …

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