By Svea Herbst-Bayliss and Dawn Chmielewski
NEW YORK (Reuters) – Hedge fund Barington Capital called on Paramount Global on Friday to abandon its exclusive merger talks with Skydance Media, arguing that all shareholders would benefit if the company considered other potential bidders.
The New York-based hedge fund that owns 325,000 shares of Paramount has joined a chorus of increasingly angry investors who say they fear being cheated in a potential deal widely seen as favoring the company’s majority shareholder, Shari Redstone becomes.
“We strongly reject the special committee’s decision to enter into an exclusivity agreement with Skydance – or any other party,” Barington portfolio manager James Mitarotonda wrote to Paramount’s board. “By deciding not to negotiate with other parties or allow them to conduct due diligence, the special committee has effectively watered down the process.”
Paramount began a 30-day exclusive negotiation period with Skydance, the studio that collaborated with Paramount Pictures on hits like “Top Gun: Maverick,” as a special committee of its board considers the possible acquisition of the smaller independent studio in an all-stock deal worth 4 to 5 billion US dollars.
Skydance is separately negotiating to acquire National Amusements (NAI), a company that owns the Redstone family’s majority stake in Paramount, according to a person familiar with the terms of the deal. This transaction is contingent on a Skydance-Paramount merger.
Mitarotonda, whose fund has pushed for changes at companies ranging from toy maker Mattel to restaurant owner Bloomin’ Brands to clothing company Chico’s, was particularly critical of potential conflicts of interest and self-dealing in the Skydance deal.
“Redstone is free to complete any transaction it chooses for NAI on terms it deems acceptable. However, the Board and the Special Committee cannot allow Ms. Redstone to enter into a deal for NAI if the completion of that deal is conditional.” “since Paramount had to acquire another company – in this case Skydance – at a significant premium, which diluted all other shareholders,” he wrote.
The battle over the future of the two companies begins just a week after Walt Disney barred Trian Fund Management from winning board seats and playing a role in steering the entertainment giant’s future, at a time when companies are struggling with the integration of artificial technology and the changing preferences of customers in media consumption.
Instead, Barington urged Paramount to consider an approach from private equity giant Apollo Global Management, which has expressed interest in buying Paramount for more than $26 billion, including debt. “Barington does not have a crystal ball, but the Apollo offer appears to be simpler, clearer and reasonably accretive given the numerous risks associated with the Skydance deal,” the letter said.
Paramount declined to comment on the letter, which was first reported by Bloomberg.
Earlier this week, major investors including Ariel Investments and Gabelli Funds expressed concerns.
(Reporting by Svea Herbst-Bayliss in New York and Dawn Chmielewski in Los Angeles; Editing by David Evans)