GAMCO Investors chairman Mario Gabelli has elected to receive cash for his firm’s voting shares in Paramount Global as the media giant’s $8 billion merger with Skydance is set to close later this week.
Per a 13D filing with the U.S. Securities and Exchange Commission, Gabelli’s firm owned 4.89 million Class A shares, or 12.03% of Paramount’s voting stock, as of May 5. Shareholders had until July 31 to decide on whether to elect cash or stock in New Paramount.
“Given the terms of Paramount’s pending combination with Skydance Media, in which current holders of the class A voting stock have no opportunity to continue to hold such voting stock, GAMCO is effectively being forced to receive cash for those shares,” the firm said in a statement.
In addition to the A shares, Gabelli previously disclosed ownership of around 900,000 of Paramount’s Class B shares. A spokesperson for Gabelli declined to comment beyond the 13D filing on the firm’s remaining ownership in Paramount stock.
Under the two-step deal, Skydance is set to acquire controlling shareholder Shari Redstone’s holding company National Amusements, which controls 77.4% of the Paramount Class A common stock outstanding and approximately 9.5% of the overall equity of the company, before merging with the Hollywood studio.
The deal provides $2.4 billion for Redstone, $4.5 billion to non-NAI Paramount shareholders and an additional $1.5 billion in new capital to help pay down debt and recapitalize the company’s balance sheet.
Class A shareholders were given the option to elect to receive $23 cash per share or 1.5333 shares of Class B stock of New Paramount, while Class B shareholders had the option to elect to receive $15 per share or one share of Class B stock of New Paramount, which is subject to proration if those elections exceed $4.3 billion in aggregate. If shares were elected over cash — reducing the cash required to under $4.3 billion — the $1.5 billion of cash going to Paramount’s balance sheet could grow up to a cap of $3 billion.
Based on the $23 per share price, Gabelli’s voting stake would be worth $112.6 million.
Skydance’s consortium of investors, which includes RedBird Capital Partners and the Ellison family, will control 70% of shares outstanding and have 100% voting ownership in New Paramount. The combined company will have an enterprise value of $28 billion, while Skydance is being valued at $4.75 billion.
Per an amendment in the company’s broadcast license transfer application filed with the FCC, New Paramount chairman and CEO David Ellison will grant Sayonara LLC, which is controlled by his father and Oracle co-founder Larry Ellison through a revocable trust, a voting interest equal to approximately 35.5%. Meanwhile, the elder Ellison’s Pinnacle Media will grant the younger Ellison 64.5% of its respective voting interest in NAI.
In accordance with the voting percentages, David Ellison and Sayonara have the right to designate the Ellison family directors of NAI and New Paramount. The company’s incoming board of directors includes Oracle CEO Safra A. Catz, current Paramount board member Barbara Byrne and former Paramount chairman and CEO Sherry Lansing, among others.
The amendment notes that Sayonara will not have any “veto rights, or any special or outsized voting rights,” in NAI or New Paramount as a result of the minority voting interest. It added that the changes were being undertaken for “the sake of efficiency and cost savings at New Paramount.”
Upon closing of the deal, Paramount shares will trade on the Nasdaq under a new ticker symbol: PSKY.
Gabelli’s latest move comes as he has called for a “more equitable distribution” of Redstone’s payout. He believes that Paramount ascribed no value to any of NAI’s assets other than its Paramount stock in the deal with Skydance, allowing her to receive “significantly greater value” than the $23 per share offered to other Class A shareholders.
He previously filed an initial books and records request seeking to determine the exact value of Redstone and NAI’s shares. He would later file a formal complaint under a Section 220 demand after telling the Delaware Court of Chancery that Paramount had refused to produce certain electronic documents, including communications, that were deemed “critical” to his effort. Additionally, he filed a petition with the FCC asking the agency to pause its review of the merger due to a require transfer of broadcast licenses.
Following a trial, a judge from the Delaware court determined that Gabelli’s Value 25 mutual fund “stated and proved a credible basis to suspect wrongdoing,” but stopped short of ordering Paramount to provide any additional documents. As of Jan. 31, Paramount produced nearly 6,000 pages of records for Gabelli’s initial request. As of March 19, he’d received nearly 10,000 of those documents, which included board and committee-level minutes and materials, director questionnaires and draft public filings.
Gabelli’s effort, dubbed Project Fishbowl, has been pursued on behalf of over 700 clients. In addition to Gabelli, the court previously granted the request of another Paramount shareholder, The Employees Retirement System of Rhode Island, to obtain books and records related to the Skydance deal.
