PARAMOUNT Global is poised to defeat a demand to turn over internal files to a pension fund that’s raising questions about its US$2.4 billion acquisition by Skydance Media that shifts control of the storied Hollywood studio to producer David Ellison.
The Employees’ Retirement System of Rhode Island, which owns Paramount shares, wants to know whether Paramount’s controlling shareholder Shari Redstone could have cut a better deal for minority investors. The fund seeks assurances that Paramount directors got the best price for the owner of CBS, MTV and other TV channels from Ellison, who is the son of Oracle chairman Larry Ellison.
In a preliminary ruling following a hearing, Delaware Chancery Court Magistrate Selena Molina concluded on Friday (Aug 2) that the pension fund has not shown it has a legitimate purpose for inspecting the Skydance files or that Paramount Global wrongfully withheld them. The buyout calls for Redstone to sell her family’s National Amusements firm – which controls about 77 per cent of Paramount’s voting stock – to Skydance.
Molina’s recommendation is subject to review by another Chancery Court judge, who will issue a final order.
Justin Dini, a Paramount spokesman, declined to comment.
The magistrate, who read her recommendation in a 20-minute telephone hearing, took issue with press articles cited by the retirement fund to support its request to look at the books and records. Many of the news reports relied on anonymous sources, Molina said.
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“These purported scoops or leaks, which could also be called rumours,” fail to provide “a credible basis to suspect wrongdoing”, she said.
Under the deal, the Ellison family and RedBird Capital Partners have agreed to invest more than US$8 billion in Paramount, including US$1.5 billion to help pay down the media conglomerate’s debt and US$4.5 billion to buy Paramount shares.
The buyout also allows non-Redstone voting shareholders to cash out for US$23 a share or roll their stock into the combined company. Nonvoting shareholders would get US$15 per share in cash or one share in the new company.
The extended merger talks led to a shareholder revolt over the buyout’s possible harm to minority investors. Paramount’s board had been hesitant to bless the deal amid opposition from investors such as billionaire money manager Mario Gabelli and Barington Capital Group.
The fund also wants access to files tied to other offers for Paramount – from rivals and suitors such as Sony Entertainment, private equity fund Apollo Global and media mogul Barry Diller.
Lawyers for the Rhode Island fund argued they have a right to access files about the deal to assuage concerns that Redstone violated legal duties she owes to minority investors under Delaware law. Paramount is incorporated in the state, while the Redstone’s company – National Amusements – is incorporated in Maryland.
After the deal closes, which is expected in the first half of 2025, the Ellison-led group will own about 70 per cent of Paramount’s shares outstanding. The sellers have 45 days to seek better offers. The Skydance deal includes a US$400 million breakup fee if it falls apart.
Paramount has argued that the fund’s demand for information filed in April is now outdated as the terms of the Skydance deal have evolved. BLOOMBERG
