Paramount Global and Skydance Media’s exclusive talks are expected to end without a deal, raising concerns among minority investors about controlling shareholder Shari Redstone’s duty to prioritize their interests. A complaint filed by the Employees’ Retirement System of Rhode Island alleges that Redstone’s conflicting interests may have undermined Paramount’s ability to secure a better deal than the one offered by Skydance.
The lawsuit targets Redstone’s alleged conflict of interest and questions the board’s decision-making process regarding the potential merger. Minority shareholders are worried that the deal could dilute their investments and undervalue Paramount, especially since other offers, like a reported $26 billion all-cash offer from Apollo Global and Sony Pictures, were allegedly not seriously considered.
To address concerns of a conflict of interest, an independent committee of board members was formed. However, the abrupt resignation of four Paramount directors and the ousting of CEO Bob Bakish have added to the uncertainty surrounding the deal.
While Delaware law typically defers to controlling shareholders in deal assessments, a recent order from the Delaware Supreme Court could impact the standard of review in a potential lawsuit challenging the deal. The court found that the test of entire fairness, designed to protect minority shareholders, applies in cases where a controlling shareholder stands on both sides of a transaction.
Despite the legal complexities, some argue that Redstone may have been looking out for the long-term interests of minority shareholders by considering Skydance as a strategic partner for Paramount. With Skydance’s successful track record in entertainment and media, as well as connections to tech expertise through Redbird, the deal could have potentially benefited all stakeholders involved.