Sony-Apollo Bid for Paramount Could ‘Bring Much More to the Table’ Than Skydance, Matrix Asset Advisors Says

The firm argues there’s “near-universal agreement” among Paramount shareholders that David Ellison’s bid is not in their interests

Skydance CEO David Ellison, Apollo CEO Marc Rowan and Paramount Global Non-Executive Chair Shari Redstone
Skydance CEO David Ellison, Apollo CEO Marc Rowan and Paramount Global Non-Executive Chair Shari Redstone (Chris Smith/TheWrap)

Matrix Asset Advisors, which has previously slammed Skydance’s bid to merge with Paramount Global as “sub-optimal” and “detrimental” to the company’s value, is urging the media conglomerate’s board to let the two parties’ exclusive talks expire on May 3 without an agreement and consider other proposals.

Matrix, which owns 355,445 Paramount shares on behalf of its clients and itself and has over $1 billion in assets under management, cited a number of investors who have expressed opposition to the Skydance deal, including Ariel Investments, Aspen Sky Trust and Blackwood Capital Management. Ariel’s founder and chairman John Rogers Jr. and GAMCO Investors Inc. chairman and CEO Mario Gabelli have also both previously warned that they could pursue litigation if the Skydance deal or any other bid does not appropriately benefit their clients.

“Each has done their own analysis but have come to the same conclusion – the Skydance deal is bad for Paramount shareholders. Shareholder lawsuits also seem inevitable,” the firm’s chief investment officer David Katz wrote. “Based on the feedback and comments that we have gotten from other shareholders, we believe that many others have privately sent a similar message to the Board. We believe that, outside of Shari Redstone, there is near-universal agreement among the Paramount shareholders that the Skydance deal is a BAD deal and not in
their interests.”

Katz argued that the departure of four board directors from Paramount’s board, including three who were on the independent special committee evaluating bids, is “being perceived by the investment community as them distancing themselves from being part of a bad decision or trying to avoid the personal liability likely associated with pursuing a course of action which violates their fiduciary responsibility.”

In addition to Skydance, Apollo Global Management made a $26 billion all-cash offer for Paramount, though that bid was reportedly rebuffed due to concerns about financing. The private equity firm has since entered talks with Sony Pictures Entertainment about the possibility of making a joint bid for Paramount, though no formal offer has been made.

“Sony is a vibrant industry competitor with broad exposure to entertainment
and technology, and deep financial resources,” Katz said. “The combination of Apollo+Sony is a potential merger partner that can bring much more to the table than Skydance can, and must be considered as a viable and attractive alternative to the sub-optimal Skydance deal being studied during this excessively restrictive period of exclusivity.”

Matrix urged the board to give Apollo and Sony or other bidders a fair chance to make a competing and compelling offer.

“A cash deal that provides a significant premium to all shareholders now, which better reflects the value that Paramount has built over its long, storied history and the future growth of that value, is far superior to a massively dilutive deal that at best may recover the initial diminution in value at some uncertain point in the distant future,” Katz added.

Matrix’s latest letter comes as David Ellison’s media company and Paramount have been making progress on merger talks.

Under a potential deal, Skydance would infuse between $4.5 and $5 billion of fresh capital into Paramount – $2 billion of which would be used to buy out Redstone’s majority stake through National Amusements, while another portion would be used to pay down debt, an individual familiar with negotiations told TheWrap.

Skydance and its a consortium of investors backing the bid, including RedBird Capital Partners and KKR, would have a nearly 50% ownership stake, while the rest of the company would be owned by common shareholders and remain publicly traded. The combined company would be valued at around $5 billion.

Ellison would become CEO of Paramount, replacing current CEO Bob Bakish, and former NBCUniversal CEO Jeff Shell would serve as president. Skydance’s chief creative officer Dana Goldberg and president Jesse Sisgold are also expected to have major roles in the combined company. Leadership is also looking at potentially restructuring the company to reorganize CBS, cable, BET and Nickelodeon under a central team.

But Katz argues that Bakish’s current strategy “appears to be progressing” and that forcing him out would be a “meaningful step backward in leadership quality.”

“In our opinion, the go-it-alone-and-stay-the-course option would be better for shareholders than the sweetheart deal with Skydance which would only benefit Shari Redstone and David Ellison,” the letter concluded. “The Paramount Global Board of Directors must be mindful of its fiduciary duty. At this point, it is incumbent upon the Board to run a free, open, and transparent process aimed at maximizing the value of Paramount Global for ALL shareholders, and not simply rubber-stamp a transaction aimed at rescuing one shareholder from financial trouble to the detriment to the other 90% owners of the company. Your fiduciary responsibility as directors and your future legacy as business leaders depends on the actions you take today.”

Shares of Paramount are up 9% in the past six months, but have fallen 44.6% in the past year and 16.8% year to date. The company’s market capitalization sits at $8.4 billion as of Friday’s trading session.


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