total-news-1024x279-1__1_-removebg-preview.png

SELECT LANGUAGE BELOW

Mario Gabelli legal threat affected doomed Paramount merger

Legal threats from investor Mario Gabelli were a “major factor” in the collapse this week of Shari Redstone’s $8 billion deal to merge Paramount Global with “Mission: Impossible” production partner Skydance Media, The Washington Post has learned.

Redstone was facing a lawsuit from Gabelli for more than $100 million over the deal when she made the surprising move to pull the plug on it this week just before the Paramount special committee was due to vote, according to people familiar with the matter.

The 70-year-old media heir was a major investor in Paramount for many years, but there have been no recent discussions with Gabelli, according to people familiar with the matter.

Mario Gabelli holds the most voting power at Paramount outside of Shari Redstone. Getty Images

Nonetheless, other Paramount shareholders slammed Redstone for demanding a premium for his company’s shares over other Paramount investors.

In an exclusive interview with The Washington Post, the 81-year-old billionaire, a self-described “Bronx tough guy” who has long been known for his savvy media investments, declined to go into details about the potential litigation surrounding Paramount.

But he did not deny that it could have happened.

“As Teddy Roosevelt said, I speak softly and carry a big stick,” Gabelli said. “We’ve built relationships with attorneys and we’re putting all of this under a microscope.”

Redstone, the daughter of the late media mogul Sumner Redstone, controls Paramount through her 77 percent stake in National Amusements, the holding company that controls the company’s voting shares.

Meanwhile, Gabelli owns more than half of the remaining voting stock — 54% to be exact — according to securities filings.

In addition to Skydance’s recent cut in its payment to National Amusements to $17 a share from more than $2 billion, a sticking point in the negotiations is whether Skydance will indemnify Redstone from potential lawsuits if he fails to seek shareholder approval for the deal, the people said.

Redstone said he called off the talks for non-financial reasons. Patrick McMullan via Getty Images

In fact, sources said, Gabelli’s legal team focused on National Amusements, leaving Redstone himself to shoulder most of the blame.

Redstone’s lawyers reportedly emailed the Paramount special committee on Tuesday saying the company and Skydance could not agree on outstanding “non-economic terms.” Legal liability surrounding the shareholder vote was a major issue, according to people familiar with the matter.

“People see Gabelli as an activist and litigator,” said a Wall Street analyst who covers Paramount shares.

“Sharri and the Paramount Special Committee know very well what the outcome of the vote would have been had there been an independence referendum,” the analyst added.

Skydance wanted to merge its studios with Paramount. Shutterstock / KI Photography

This isn’t the first time Gabelli has gone to court to extract his fair share from Redstone.

Last April, Gabelli and other shareholders won a $122.5 million settlement over the $30 billion merger of Viacom and CBS, the deal that led to the creation of Paramount Global.

Gabelli complained that Redstone and Viacom’s special committee breached their fiduciary duties by approving the deal without shareholder approval.

Gabelli believes the Skydance deal was even worse, given the steep premium Redstone was seeking for her shares, the sources said.

Mr. Redstone feared Mr. Gabelli’s wrath, even though the shareholder vote on the Skydance merger would have combined voting power and common stock, limiting Mr. Gabelli’s influence, the people said.

Now, rather than sell all of Paramount, Redstone is reportedly considering selling National Amusements to bidders including Edgar Bronfman Jr.

“One possibility as to what’s going on is that if she gets a deal to sell part of National Amusements then there won’t be a lawsuit,” Gabelli said.

That’s not necessarily a safe bet, either: Sources say Bronfman is considering a plan to separate Paramount Global’s streaming business from its slow-growing cable channels and have the latter take on the company’s debt.

Like Teddy Roosevelt, Gabelli says, he “spoke softly and carried a big stick.” Getty Images

Technically, Redstone does not need shareholder approval to sell National Amusements.

But if a buyer subsequently tries to make changes to Paramount Global, it could face shareholder opposition over change-of-control provisions, the people said.

“If she were to try to sell NAI, she would have six months to determine whether it was a change of control while the FCC investigates the transaction,” Gabelli said.

“I would rather not sell,” Gabelli told The Washington Post in an exclusive interview in April.

Despite concerns about the media giant’s huge debt load, slumping movie theater performance and cable TV subscriber cancellations, Gabelli said the company’s outlook is good thanks to cost cutting and the expansion of its Paramount+ streaming service.

Redstone may also consider selling his holding company, National Amusements. Getty Images

He reiterated that position this week.

Gabelli said he thinks the value of the streaming business, which includes Paramount+, will soar from $13 billion this year to $19 billion in 2027.

He also predicts that the value of the movie business will more than double within three years, from $830 million to $1.7 billion.

“We are marathon runners and view Paramount as long-term owners,” Gabelli told the Post.

Facebook
Twitter
LinkedIn
Reddit
Telegram
WhatsApp