Paramount Stock Drops Over 5% After Board Considers ‘Sub-Optimal’ Merger Bid
Paramount Global’s (NASDAQ: PARA) stock fell 5.19% to $11.35 on Monday as the company’s board faced criticism from a significant shareholder over a potential merger with Skydance Media.
Matrix Asset Advisors, a significant shareholder with 355,445 Paramount shares, has taken a firm stance. They are urging the board to reject a ‘sub-optimal‘ bid from Skydance Media, arguing that the deal seems to prioritize the interests of a single shareholder, Shari Redstone, over the broader shareholder base.
Paramount Shareholder Raises Concerns Over Skydance Deal
In a statement, Matrix expressed concerns that the Skydance deal would significantly dilute shareholder value, with most shareholders not receiving a premium similar to what Shari Redstone was offered for monetizing her stake.
The investment firm also questioned the board’s decision not to consider a $26 billion cash offer from Apollo Global due to financing concerns, suggesting that Apollo should be given the same opportunity to perform due diligence and confirm financing as Skydance.
Matrix Asset Advisors is not mincing words. They oppose any deal that dilutes current shareholders or fails to reflect Paramount’s actual value and warn of potential shareholder lawsuits and breaches of fiduciary duties by the board.
This criticism comes when Paramount’s stock is struggling, with a 52-week range between $10.16 and $24.00 and a market cap of $7.83 billion.
Paramount’s Current Options
As the board ponders its options, shareholders are left to grapple with various potential scenarios. If no deal is reached, Paramount’s stock could face challenges from market fluctuations, short-selling, and negative analyst perceptions. At the same time, the financial conditions at National Amusements, Inc. (NAI) remain a concern.
On the other hand, shareholders could also benefit from re-rating the share price as the company’s fundamentals improve. An Apollo deal would provide shareholders with an immediate cash payout, estimated at around $21 per share, but they would forego potential future value increases from improving fundamentals and strategic divestitures.
The Skydance deal, seen as the most likely scenario, is complex and potentially dilutive. Its outcomes heavily depend on the size of the cash infusion from the buyer consortium in exchange for a 45% to 50% stake in the combined company.
Shari Redstone might sell her voting shares for about $2 billion, making the deal’s acceptability contingent on the cash infusion’s size. Despite the dilution, a significant cash injection could make the deal more palatable to shareholders, as they would still participate in the new company’s potential upside.
However, concerns remain that the Skydance deal may benefit Shari Redstone at the expense of non-voting shareholders, reflecting broader issues of governance and the impact of dilution on shareholder value.
Do you see Paramount Global going through with the proposed merger? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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