By Bill Alpert
The confusing plot of Paramount Global's buyout saga is getting panned by public shareholders.
Four of the studio's directors are stepping down, according to The Wall Street Journal. Exiting investors have knocked 20% off the price of Paramount's nonvoting B-shares in the week since news emerged that Shari Redstone has agreed to sell her controlling A-shares to Skydance Media at a fat premium that widens with every downtick of the nonvoting stock.
The rout in the B-shares paused Thursday morning, with a 7% rise. But the premium remained wide. A-shares were going for $23, while B-shares traded for $11.22.
"We have yet to talk to a single investor that wants a Paramount/Skydance merger," wrote LightShed Partners media analyst Richard Greenfield in a Thursday note. Investors' stock will be "massively" diluted by the Skydance deal, he said.
Neither company immediately responded to a request for comment.
"Given that the dilution grows as Paramount stock falls, it is hard to see why any public investor sticks around with no floor in PARA shares," Greenfield said.
It's hard to size up the dilution that B Class shareholders would suffer in a Skydance merger, given the few details available. A Wednesday note by Guggenheim Securities analyst Michael Morris estimated that an all-stock combination would reduce the economic ownership of current B Class holders from around 90% now, to less than 60% after a deal.
Skydance is a privately held production company run by David Ellison and backed by his father, Larry Ellison, the co-founder of Oracle. It has partnered with Paramount on movies like Tom Cruise's Top Gun: Maverick and Mission: Impossible -- Dead Reckoning Part One.
Under the agreement in principle reported by the Journal on April 3, Skydance would pay about $2 billion cash for Redstone's National Amusements, a company that owns near 80% of the voting A-shares of Paramount Global. Paramount agreed to exclusive talks with Skydance, the Journal said, after passing on an $26 billion offer by Apollo Global Management.
Among Paramount's unhappy investors is the firm Ariel Investments. "Any merger talks that forego competitive bidding in favor of an exclusive discussion with a single buyer, particularly where the reported control premium differentiates the financial position of a single shareholder over all other shareholders, is averse to the fair market value of a company," it said in a Thursday statement.
Analyst Greenfield figures that even Paramount's departing directors could be sued by unhappy stockholders if an independent committee appointed by the board approves a Skydance deal before exclusivity ends on May 3. Those directors won't be replaced until Paramount's proxy voting later in May.
Guggenheim's Michael Morris expects the board will go along with a Skydance deal.
"We expect the independent committee will have a preference to approve the Skydance proposal as it pleases Ms. Redstone," wrote Morris. "The aim would be to find a defensible rationale for the merger being 'good for all shareholders,' which in itself does not preclude the material premium for Ms. Redstone's holdings."
Write to Bill Alpert at william.alpert@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 11, 2024 13:36 ET (17:36 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments