Paramount Investor Asks Judge for Access to Sale Documents

Jef Feeley, Bloomberg News

The Paramount Studios in Los Angeles, California, US on Monday, April 29, 2024. The Redstone family and independent film producer David Ellison have both offered concessions to make a possible change in control at Paramount Global more appealing to the company's other investors, according to a person familiar with the talks. Photographer: Eric Thayer/Bloomberg , Bloomberg

(Bloomberg) -- A Paramount Global investor is going to court, concerned that a merger of the film and TV company may harm minority investors.

The Employees’ Retirement System of Rhode Island asked a Delaware judge to order the company to turn over files related to its talks with David Ellison’s Skydance Media, according to a filing Tuesday in the state Chancery Court.

Paramount’s controlling shareholder Shari Redstone may be hampering the media giant’s chances to cut a better deal than the terms offered by Ellison, the pension fund said. Its managers want to be confident that board members of Paramount, which owns CBS, MTV and other properties, get the best price for the company.

Ellison’s Skydance Media is proposing to take a controlling stake in Paramount through a series of transactions, starting with a deal to buy National Amusements, the Redstone family company that holds a 77% voting stake in the company. Ellison is the son of Oracle Corp. co-founder and Chairman Larry Ellison.

Skydance is also proposing to buy $3 billion of Paramount shares at a premium to their current price to shore up the film and TV company’s finances, according to people familiar with the negotiations. The board and Skydance’s representatives have been discussing how much of that money would go to share buybacks and how much for debt reduction.

The pension fund is “concerned the Paramount board has failed to prevent Shari Redstone from diverting corporate opportunities or interfering with Paramount’s ability to seek the best deal for Paramount and its other stockholders,” according to the filing.

The fund’s lawyers want access to board materials about how Ellison’s offer has been evaluated and other proposed offers for the struggling entertainment company, according to the filing.

Paramount didn’t respond to a request for comment.

The merger talks have led to a shareholder revolt over possible harm to minority investors. Paramount’s board has been hesitant to agree to a deal given the opposition from investors such as billionaire money manager Mario Gabelli and Barington Capital Group LP, which said the company should consider options that benefit all shareholders, not just the Redstones.

John Rogers, founder of Ariel Investments and a longtime stockholder, said Tuesday on Bloomberg TV that a sale of the company to Sony Group Corp. and Apollo Global Management Inc. would be better.

“That seems like a marriage made in heaven,” Rogers said. “We wouldn’t rush to the altar with a smaller company that’s not as proven.”

Read More: Listen to the John Rogers interview

Lawyers for the Rhode Island fund say they have a “credible basis” for fearing Redstone may violate legal duties she owes to minority investors under Delaware law. Paramount is incorporated in the state while the Redstone’s company — National Amusements — is incorporated in Maryland.

To get to internal company files, shareholders must show they have a proper purpose for seeking the documents. Such actions, known as “books & records” cases, are heard on an expedited basis and shareholders often can get access to at least some records.

The case is State of Rhode Island Office of the Treasurer v Paramount Global, 2024-0457, Delaware Chancery Court (Wilmington).

(Updates with comments from filing in sixth paragraph.)