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With growing speculation that Skydance Media, RedBird Capital and KKR will take a significant minority or slight majority stake in Paramount Global, three questions loom over the deal.
The most obvious question is what controlling shareholder Shari Redstone wants to achieve out of any sale. The Redstone family’s National Amusements (NAI) currently directly or indirectly owns 77% of the Class A voting stock of Paramount Global and 5.2% of the Class B common stock. In total, that reflects 10% of the overall equity of the company but still gives NAI significant control over the corporation's operations and policies.
The second question—reflected in multiple angry shareholder letters this week, so far (like the one I highlighted on Monday) —is whether the Skydance deal will be an outcome that will serve NAI’s fiduciary duty to act in the best interests of minority shareholders. This question looms larger after Redstone reportedly turned down a $26 billion offer—$12 billion for Paramount’s equity and $14 billion in net debt—from private equity firm Apollo Global Management to continue negotiations with Skydance. The Skydance deal terms, as they stand now, will reward Redstone with $2 billion in cash and Skydance would be acquired in an all-stock deal requiring new shares to be issued, thereby diluting minority shareholders.
The decision seems to have had one unfortunate consequence for Redstone: Yesterday, four directors serving on the special committee of the board of directors—generally appointed to protect minority shareholder interests when there is an appearance of conflict with controlling shareholders or management or affiliated entities—announced they will step down from the board. This is an unusual and rare step for special committee members to take during an ongoing deal process, especially en masse. Their resignations imply their conclusions that the proposed Skydance deal will not serve the best interests of Paramount's minority shareholders and will face litigation from angry shareholders to prevent any deal with Skydance from closing.
The third and arguably most important question is whether the proposed Skydance deal will return Paramount on the path back to growth. According to The Medium’s “Three Guidelines To Understand This "Weird" Market Moment In Media”, this path would meet three conditions:
These conditions seem to be less important to Redstone and Ellison than they should be.
A $2 billion cash-out seems to matter most to Shari Redstone.This may be because she has realized audiences simply are increasingly unsentimental for Paramount's library or IP.
Total words: 1,800
Total time reading: 7 minutes
The Wall Street Journal reported that with the backing of his father, Oracle co-founder Larry Ellison, Skydance CEO David Ellison “has laid out a plan to grow Paramount by investing in technology, moving aspects of the business to the cloud and ...