Paramount's Messy Merger: Shareholders Cry Foul as Redstone Family Cashes In

Paramount, the iconic media company, has been embroiled in a complex and contentious saga as it navigates a merger with Skydance Media. While the deal has been finalized, it has left a trail of disgruntled shareholders who feel they were shortchanged in the process. The Redstone family, led by Shari Redstone, has emerged as the primary beneficiary, extracting a significant payout before agreeing to the merger. This has sparked outrage among other shareholders, including the renowned money manager Mario Gabelli, who are now exploring legal action to recoup their losses and ensure a fair outcome.

Uncovering the Untold Story of Paramount's Tumultuous Transition

The Redstone Family's Payday and the Shareholders' Discontent

The Paramount-Skydance merger has been a long-drawn-out affair, with Shari Redstone, the owner of Paramount, extracting a nearly $2 billion payday before agreeing to the deal. This has left other shareholders, who hold the same "Class A" controlling shares as Redstone, as well as the "Class B" non-voting common stock, feeling shortchanged. They argue that the generational wealth has been disproportionately transferred to the Redstone family, while they have been left with pennies on the dollar.One of the largest shareholders, the renowned and famously cantankerous money manager Mario Gabelli, has been vocal in his dissatisfaction. Gabelli's representatives have been meeting with major law firms, exploring the possibility of filing a lawsuit against the newly combined company in an effort to extract a more favorable payout for his clients. Gabelli, who has been managing money successfully for longer than Skydance's 41-year-old CEO David Ellison has been alive, is known for his deep-dive research and his unwavering pursuit of the highest possible returns for his clients.

Paramount's Decline and the Rationale Behind the Merger

Skydance and its supporters argue that the Paramount-Skydance merger is not as one-sided as Gabelli suggests. Over the past five years, as cord-cutting and movie attendance have waned, Paramount has become a near also-ran in the media landscape. Its foray into streaming was a costly mess, and its stock has lost tens of billions in market value. The company is barely profitable, and only as it slashes costs and headcount.This is why the Paramount-Skydance deal, which was on-again off-again for months, had rival bidders dropping out. Ellison, the son of Oracle co-founder Larry Ellison, had the resources to satisfy Shari Redstone's demands and the capital to try to fix what was a significantly decaying asset. Media analyst Rich Greenfield of Lightshed Ventures argues that without this transaction, Paramount would be a $5 stock, and shareholders like Gabelli need to consider the broader media landscape, which includes the shaky businesses and floundering share prices of Disney and Warner Bros. Discovery.

The Struggle for Transparency and Shareholder Representation

Gabelli and other shareholders have been frustrated by the lack of transparency from Paramount Global, which won't be in Skydance's hands officially until sometime next year. Paramount has been dragging its feet on disclosing the full details of the deal, particularly concerning Shari Redstone's entire payout.To address this, Gabelli's firm has filed a "220" notice with the courts, a legal maneuver that aims to compel Paramount to provide the necessary information. Gabelli is also angling for a role as the lead shareholder plaintiff, should the case go to court. He believes this will give him standing protection from an immediate dismissal and allow him to pursue a more favorable outcome for his clients.Skydance, on the other hand, argues that they have made efforts to address the concerns of shareholders like Gabelli. They point to the improved terms of the deal, which include the Class B common shareholders being able to sell their shares for a premium, and all shareholders having the opportunity to participate in the upside as Skydance invests in the new, improved Paramount.As the dust settles on this complex and contentious merger, the battle lines have been drawn between the Redstone family, Skydance, and the disgruntled shareholders. The outcome of this saga will not only determine the future of Paramount but also set a precedent for how media companies navigate the challenging landscape and balance the interests of all stakeholders.