The planned $8 billion merger between Paramount Global and Skydance Media LLC would cost Paramount’s public shareholders more than $1.6 billion, according to a lawsuit challenging the transaction.
An investor sued to block the deal Wednesday, targeting media mogul Shari Redstone, her principal holding company, other Paramount board members, Skydance, and its CEO, David Ellison. The court complaint calls Redstone a “relentless controlling stockholder” who’s forcing through an unfair transaction to bail out her own “floundering” investment.
The transaction reflects “history repeating itself” after Redstone spent years working to merge CBS Corp. and Viacom—reuniting her family empire—by ousting dissident directors and stacking the boards of both companies with loyalists, according to the proposed class action filed in Delaware’s Chancery Court. The CBS-Viacom deal, which created Paramount, led to protracted litigation in the same court.
“The Paramount board is packed with Redstone insiders, over whom she exercises control,” the new suit says. “The directors were well aware of Redstone’s modus operandi of removing directors when she was not satisfied with them; and it is reasonable to infer that this thought weighed on the decisions they made.”
Representatives of Paramount, Skydance, and Redstone’s National Amusements Inc. didn’t immediately respond to requests for comment Thursday. Ellison is the son of Oracle Corp. founder Larry Ellison—the world’s seventh-wealthiest person, according to the Bloomberg Billionaires Index—who’s reportedly investing $6 billion in the merger.
‘Redstone Powerplay’
The lawsuit, filed by an individual shareholder, zeroes in on allegations that the deal overvalues Skydance, overpays Redstone, and includes too little cash to give every public investor the merger price of $15 per class B share.
The payout of cash and stock is only worth $12.23 per Paramount Class B share, leaving non-NAI Class B shareholders with $1.645 billion in damages, the suit says.
Analysts have panned the transaction, dismissing it as a “Redstone powerplay” and downgrading Paramount’s stock ratings, while news of the exclusive deal talks sent its shares “trending downward continuously,” according to the court filing.
The complaint also assails the “unusually large” $400 million termination fee Paramount will owe Skydance if it calls off the merger, saying the provision will likely deter other credible bidders from coming forward.
The case comes about three months after a Rhode Island pension fund filed a preliminary lawsuit seeking merger-related documents from Paramount under a law that gives investors broad access to corporate records if they credibly suspect self-dealing.
A ruling in that case has been scheduled for Aug. 2. Records suits often reflect an attempt to drum up fiduciary breach claims for future litigation.
The shareholder leading the new lawsuit, Scott Baker, allegedly owns 40,000 class B shares. He’s represented by Berger Montague PC. Redstone, Ellison, and their companies haven’t yet made court appearances.
The case is Baker v. Redstone, Del. Ch., No. 2024-0790, complaint filed 7/24/24.
