Paramount Shareholder Asks for Court Order to Obtain Documents Tied to Skydance Merger Talks

The Employees’ Retirement System of Rhode Island is concerned Shari Redstone may be interfering with the board’s ability to find the best deal for shareholders

Skydance Media CEO David Ellison and National Amusements President Shari Redstone
Skydance Media CEO David Ellison and National Amusements President Shari Redstone (Getty Images / Illustration by TheWrap)

A Paramount Global shareholder is looking to investigate the media conglomerate’s books surrounding its exclusive merger talks with David Ellison’s Skydance Media.

In a new filing with Delaware’s Court of Chancery, the Employees’ Retirement System of Rhode Island expressed concern that Paramount’s board has “failed to prevent Shari Redstone from diverting corporate opportunities or interfering with Paramount’s ability to seek the best deal for Paramount and its other stockholders.”

The pension fund has requested that a judge order Paramount’s board and management to turn over documents related to the discussions, including:

  • Any actual, potential or proposed sale, merger or other business combination involving National Amusements
  • Any actual, potential or proposed sale, merger or other business combination involving Paramount or any of its assets, including Paramount Studios
  • The actual or potential formation, composition and mandate of any committee of the Paramount Board to evaluate any actual, potential or proposed sale, merger or other business combination involving NAI, Paramount or any of Paramount’s assets, including Paramount Studios
  • The Executive Change in Control Severance Protection Plan
  • All emails, text messages or other electronic messages exchanged between or among Redstone or anyone representing her, on the one hand, and any other person, regarding any actual, potential or proposed sale, merger or other business, involving NAI and/or any actual, potential or proposed sale, merger or other business combination involving Paramount or any of its assets, including Paramount Studios
  • Copies of all documents produced to other Paramount stockholders in response to any Section 220 demand that relate in any way to the subject matter of this demand

“Based on information available to date, Plaintiff is concerned that Shari
Redstone and NAI have usurped Paramount’s corporate opportunities,” the filing states. “The demanded inspection will address Plaintiff’s purpose in investigating this potential wrongdoing, including whether to seek equitable relief to ensure Shari Redstone and NAI do not profit from their wrongdoing.”

According to the filing, Paramount rejected ERSRI’s request for the documents on April 5.

They noted that the company only offered to produce the “resolutions regarding the formation and mandate of the special committee,” which must approve any transaction. Earlier this month, Paramount revealed four board members would not seek reelection at the company’s June 4 annual meeting — including three who were on the independent special committee.

Representatives for Paramount declined to comment.

ERSRI is the latest Paramount investor to express opposition to the Skydance deal, following Matrix Asset Advisors, Ariel InvestmentsAspen Sky Trust and Blackwood Capital Management. They argue that Skydance’s bid prioritizes the interests of Redstone over the rest of Paramount’s shareholders and would dilute their own holdings.

Ariel’s founder and chairman John Rogers Jr., whose firm had a 1.8% stake in Paramount as of the end of 2023, and GAMCO Investors Inc. chairman and CEO Mario Gabelli, whose funds own 5 million voting shares, have also both previously warned that they could pursue litigation if the Skydance deal or any other bid does not appropriately benefit their clients.

The two-step deal would see Skydance acquire the company through controlling shareholder Redstone’s stake in National Amusements, which owns 77% of Paramount voting stock. The second step would see Skydance and Paramount merge to create a combined company valued at around $5 billion.

Under a newly revised offer, Skydance would include $3 billion cash injection as well as premium sweetener for a percentage of non-voting Class B shares in an effort to assuage minority shareholders’ concerns, an individual familiar with the negotiations tells TheWrap. Redstone, who is already set to get a premium for her shares, could take less cash and keep more equity in Paramount under one scenario being discussed. She is also open to giving non-voting, minority shareholders a say in whether any transaction gets approved.

The exclusivity window between Skydance and Paramount is set to expire on Friday and it is currently unclear if that will get extended.

In addition to Skydance, Apollo Global Management made a $26 billion all-cash offer, which was reportedly rebuffed due to concerns around the financing of its bid. The private equity firm has since entered talks with Sony about potentially making a new joint bid, though no offer has formally been made.

Paramount, whose market capitalization currently sits at $8.7 billion, has seen its shares fall 45% in the past year and 13% year to date. As of publication, its stock was trading at $12.48 apiece, slightly above the 52-week low of $10.12 hit last month.

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