Five of New York City’s pension funds have filed a class-action lawsuit seeking to pause Paramount’s pending $8 billion merger with Skydance Media, alleging that controlling shareholder Shari Redstone and members of Paramount’s special committee that evaluated bids breached their fiduciary duty.
The complaint, which was filed on Feb. 4 against board members Barbara Byrne, Linda Griego, Judith McHale and Susan Schuman and unsealed on Monday, alleges that the group failed to sufficiently consider an alternative $13.5 billion offer from Project Rise Partners, which the New York City Employees’ Retirement System says is superior to the Skydance deal.
The funds, which include the NYCERS, the New York City Fire Department Pension Fund, the New York City Police Pension Fund, the New York City Board of Education Retirement System, and the Teachers’ Retirement System of the City of New York, are seeking a court order to block the closing of the transaction until a final resolution of its claims are reached.
Paramount and the special committee declined to comment on the lawsuit, which was obtained by TheWrap.
PRP has offered to acquire Paramount’s Class B shares for $19 per share — more than the $15 per share in the Skydance offer — and Class A shares for $23 per share, the same as the Skydance offer. It also said that its bid offers up to $5 billion in debt restructuring, would add $2 billion to Paramount’s balance sheet and give B shareholders 51% of the company’s equity.
The all-cash offer is backed by a group of investors including Cinémoi president and co-chairman Daphna Edwards Ziman and ANM Group founder and CEO Moses Gross.
“For Paramount’s public Class B stockholders, PRP’s offer is vastly superior to the unfair Merger being foisted upon them. But Redstone would be left worse off, no longer due to receive the NAI overpayment, Central Park apartment, private jet and $200 million indemnification that Skydance agreed to pay her,” the pension funds wrote. “Any independent director should be duty-bound to consider it on the merits and in good faith. But Paramount’s special committee did not.”
In a previous statement to TheWrap, Paramount’s special committee said that PRP did not make an official proposal during the Skydance deal’s 45-day go-shop period nor during the 7-month sale process.
“It is unclear what PRP’s objectives are,” the committee added. “However, Paramount is bound by its agreement with Skydance Media and there will not be any engagement with PRP in contravention of such agreement.”
The pension funds argue that the special committee’s statement “elevates the contractual rights of two mutual wrongdoers above the fiduciary duties the Special Committee owes to Paramount’s innocent public stockholders” and that its outright refusal to consider the deal breaches its fiduciary duty.
The NYC pension funds’ lawsuit is the latest in a flurry of activity in the Delaware court from Paramount shareholders over the deal.
Last month, a judge granted a request by the Employees’ Retirement System of Rhode Island (ERSI) to obtain books and records related to the Skydance merger. The pension fund, which alleges controlling shareholder Redstone and her holding company National Amusements “usurped Paramount’s corporate opportunities,” is investigating “potential wrongdoing, including whether to seek equitable relief to ensure Shari Redstone and NAI do not profit from their wrongdoing.”
Mario Gabelli — the largest class A Paramount shareholder behind Redstone — has also filed a books and records requests to look into the finer details of the transaction.
In a formal complaint filed with the Delaware court, Gabelli said Paramount has produced a total of 168 documents since his initial request, consisting of “mainly sanitized board and committee minutes, transaction documents and board questionnaires.” He added that there is “credible basis to believe that NAI, members of the board and possibly senior officers of Paramount may have breached their fiduciary duties to the company as NAI apparently has orchestrated a transaction to benefit itself.”
A trial is set for April 2025, according to Paramount’s updated S-4 filing with the U.S. Securities and Exchange Commission.
Paramount shareholder Scott Baker has also filed a proposed class-action lawsuit, arguing the Skydance deal could cost shareholders $1.65 billion in damages, while funds led by the California State Teachers’ Retirement System (CalSTRS) have argued in another separate filing that the damages could exceed that figure.
The media giant is also facing a lawsuit from LiveVideo.AI Corp in the Southern District of New York, which alleges its offer to purchase Paramount was not fairly considered and asserts claims for unfair competition, tortious interference, unjust enrichment and aiding and abetting breach of fiduciary duty, among others, and seeks unspecified monetary damages, costs and other relief.
Additionally, Paramount revealed in the updated S-4 that other class A and B shareholders have delivered demand letters seeking to inspect the company’s books and records to investigate breaches of fiduciary duty. Some class B shareholders have also sent demand letters related to alleged omissions in New Paramount’s registration statement.
The Paramount-Skydance deal is currently on track to close in the first half of 2025. But the company’s S-4 warns that litigation could prevent or delay the deal’s closing, resulting in substantial costs for Paramount, including indemnification of directors and officers.
“One of the conditions to the Closing is the absence of any order or legal requirement that enjoins, restrains or otherwise prevents the consummation of the Transactions,” the filing states. “Therefore, if a plaintiff were to seek and obtain an injunction prohibiting the consummation of the Transactions on the agreed-upon terms, then such injunction may prevent the Transactions from being consummated, or from being consummated within the expected time frame.”
In addition to the legal hurdles, Paramount and Skydance must win the approval of the FCC, which is reviewing the transaction due to a required transfer of broadcast licenses of Paramount’s 28 owned-and-operated stations. The FCC has received petitions from Gabelli, LiveVideo.AI, Hollywood’s Teamsters union, the Latino-owned entertainment company Fuse Media and conservative public interest law firm The Center for American Rights.
The FCC has launched a separate investigation into a “60 Minutes” interview with Kamala Harris over allegations of “news distortion.” The interview has also prompted separate scrutiny from President Donald Trump, who is suing the network for $20 billion, alleging the interview was deceptively edited to make Harris look good ahead of the 2024 election.
If the consummation of the transaction does not occur before April 7, subject to two automatic 90-day extensions, or if a regulator blocks the merger, both Paramount and Skydance have the option of terminating the deal. Exercising that option would leave Paramount on the hook to pay Skydance a $400 million breakup fee.
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