Paramount, Shari Redstone face investor angst over possible Skydance deal

Samantha Masunaga Meg James April 10, 2024

Shares of Paramount Global were down 7%

midday

Wednesday

morning

amid reports that three of the company’s directors were stepping down as

merger

talks continue between the historic studio and tech scion David Ellison.

It’s the latest sign of unease at the media company amid negotiations between Ellison and Paramount’s controlling shareholder, Shari Redstone, which would lead to the combination of Santa Monica-based Skydance with the storied entertainment giant. Some shareholders have expressed concerns too. They worry that the structure of the deal would confer significant benefits to Redstone, who is Paramount’s nonexecutive chairwoman, at the expense of regular investors.

Paramount stock was trading at $10.16, down 7.38%, as of 10:53 a.m. Pacific time. Earlier that day, the Wall Street Journal reported that Dawn Ostroff, Nicole Seligman and Rob Klieger would be stepping down from their roles on the board in the coming weeks.

The three are among the closest directors to

Paramount’s nonexecutive chairwoman Shari

Redstone, as Ostroff and Seligman have been longtime friends with Redstone and Klieger was late patriarch Sumner Redstone’s attorney, picked

for the board

by Shari Redstone.

The stock has fallen 17% in the last five days.

Paramount declined to comment.

The stock slump comes as investors express dismay at reports of the potential deal between Ellison’s Skydance Media and National Amusements the Redstone family’s holding company and controlling shareholder of Paramount. Such a deal would give Ellison control over Paramount.

In a Monday letter to Paramounts board, investor Matrix Asset Advisors wrote that the in-the-works deal between NAI and Skydance would be detrimental to Paramount’s value. The investment firm asked the board not to accept a sub-optimal offer from Skydance, and instead more seriously consider a competing $26-billion bid from private equity giant Apollo Management Group.

Ellison first expressed interest in a deal for Paramount in December. Shari Redstone had long viewed him as a preferred buyer because of Ellison’s long association with the film studio, his respect for what’s been built and the fact that Ellison is from a younger generation, according to a person close to the sales process but not authorized to comment publicly. Ellison’s father, Oracle Corp. co-founder Larry Ellison, is also expected to contribute funding to the deal.

Santa Monica-based

Skydance has an existing relationship with Paramount, co-producing each film in the “Mission: Impossible” franchise since 2011’s “Mission: Impossible Ghost Protocol,” along with the 2022 hit “Top Gun: Maverick.”

Ellison is far from the only interested buyer. Apollo’s

Global Managementreportedly made a $26-billion

bid for the company is seen as

a deal that

more attractive to some analysts and shareholders

, who have said it would be more attractive to all shareholders than Ellison’s bid, which

. The Ellison bid heavily favors

ed

Redstone and her controlling class of shares and would dilute the value of shares for the vast majority of stockholders, they say.

“The notion of National Amusements getting a premium for their voting stock is totally warranted,” said Mario Gabelli, chief executive of GAMCO Investors Inc., whose clients own

five 5

million shares in Paramount. “The question is how much. My clients want to be treated the same as the voting stock. All voting stock should be treated equally.

Redstone is said to have recused herself from the deal-vetting process.

Warner Bros. Discovery also previously expressed some interest in a merger, though it has struggled under the load of its debt from pr

evious deals and is in similar straits as Paramount. Warner Bros. Discovery’s interest, though, was short-lived.

Media mogul Byron Allen also made a bid for the company, though his financing seemed more uncertain.