Paramount to Turn Over Records on Skydance Deal Amid Standoff With FCC

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Last year, when Paramount announced its $8 billion megadeal, Skydance seemed like the perfect fit as a buyer: they were large enough to carry weight in Hollywood, with a founder connected to significant financial resources, yet small enough that their merger wouldn’t spark concerns from antitrust regulators. Moreover, David Ellison-led Skydance suggested paying a premium on Shari Redstone’s voting shares, making the deal even more enticing. It was expected to be a seamless transaction.

Half a year has passed, and Paramount is engaged in a complex struggle on various fronts, amidst a political uproar initiated by President Donald Trump’s attempts to assert control over the media to push the deal through. One opponent is Brendan Carr, an energetic FCC commissioner who aligns with Trump, using the agency’s power over broadcast license transfers to influence parts of the merger. The other group consists of increasingly concerned investors who believe that Redstone has benefited financially at their expense.

On Wednesday, five New York pension funds filed a lawsuit in Delaware Chancery Court against Paramount, aiming to halt the deal with an immediate injunction. The confidential legal action accuses Paramount of violating its fiduciary duties and demands swift hearings to prioritize a speedy trial.

The submission of the complaint follows a Delaware judge’s order on January 29th, which instructed Paramount to disclose its financial records to a pension fund considering legal action against the company regarding the sale. Rhode Island, acting as a representative for the Employees’ Retirement System pension fund, claimed last year that Redstone may have had conflicting interests that influenced Paramount’s efforts to secure a better deal than the one proposed by Skydance. This could pave the way for another lawsuit contesting the deal, this time utilizing internal documents that might bolster claims that minority investors were sidelined during negotiations.

The decision does not compel Paramount (who chose not to respond) to instantly hand over any documents. Following a series of discussions, the court will decide the extent of document disclosure. This may encompass board records that detail how Ellison’s proposal was assessed against other options.

Redstone’s control over Paramount is special due to its unusual ownership setup. The family’s company, National Amusements, possesses 77% of the preferential voting shares and around 5% of the ordinary shares in Paramount. This means that while Redstone holds just a 10% equity share, he has the authority to manage Paramount’s operations.

The acquisition of National Amusements by Skydance is contingent upon the successful merger between Paramount and the company led by Ellison. Moreover, since Redstone will receive payment for selling the entire holding company, this arrangement creates distinct motivations for her and other shareholders.

As a passionate investor, I share the apprehensions of fellow minority stakeholders regarding this potential deal with Skydance. The primary concern is whether it might dilute existing shares, potentially forcing us to fund the investment, and inadvertently undervaluing Paramount. Additionally, there’s speculation that the board may not have thoroughly examined superior offers, such as the reported $26 billion all-cash proposal from Apollo Global and Sony Pictures, which raises questions about due diligence and fairness.

Last month, Judge J. Travis Laster from the Delaware Court of Chancery overturned a ruling in favor of Paramount. He decided there wasn’t enough proof to compel the company to disclose its financial records. The judge suggested that there was a reasonable suspicion of wrongdoing, particularly regarding allegations that Redstone may have illegally steered bidders towards a parent-level transaction, which could harm minority shareholders.

In a note, Laster stated that the evidence indicates it would be advantageous for Redstone to sell NAI individually instead of at a company level, as it could yield higher value. Additionally, the record suggests that Redstone deliberately managed the sales process in order to accomplish this outcome.

Meanwhile, while Paramount is battling to minimize the documents they’ll need to disclose, they are also dealing with Trump’s increasingly vocal demands that they should lose their broadcasting license.

As a gaming enthusiast, I’d rephrase it like this:

“For the first time ever, in a move that leaves me shocked and outraged, CBS and 60 Minutes have pulled off something underhanded. They edited Kamala’s responses to critical questions so extensively that they completely replaced her original, election-altering answers with improved ones from elsewhere in the interview. I can’t stress enough, these weren’t just tweaks; they were full-blown overhauls! This is why I’ve taken legal action and filed a lawsuit for a staggering $10 billion over this segment.”

Trump posted this message on Truth Social on Thursday.

This was unprecedented manipulation that could have swayed the election, involving interference and fraud. I believe CBS should lose their broadcasting license, the individuals involved at 60 Minutes should face consequences, and this questionable news program should be shut down immediately.

Previously dismissed by former FCC chair Jessica Rosenworcel, a complaint against CBS-owned WCBS in New York made by the Center for American Rights last year, alleging biased news reporting, has been reopened by current FCC chair Jesse Carr. On Wednesday, he initiated a case docket and is now involving the FCC in the approval process of Paramount’s sale of CBS broadcast licenses to Skydance, which is still under review by the FCC. The public will have until March to submit comments, potentially delaying approval of the deal further. Additionally, the conditions for approval could include promoting diverse viewpoints and being placed on probation until compliance is demonstrated.

The focus of Carr’s arguments revolves around allegations that CBS-affiliated stations may be leaning politically towards conservatives. This developing disagreement raises questions about freedom of speech versus the Federal Communications Commission’s (FCC) role in maintaining that public broadcasting serves the general public’s best interests. Revoking a broadcast license mid-term is typically uncommon, yet the FCC holds the power to refuse transfers, a power seldom used.

In their submission to the Federal Communications Commission, Paramount and Skydance justified the merger, dismissing accusations of ideological prejudice. They objected to the Content Advisory Resource’s proposal to impose specific conditions on the transfer of licenses, arguing that such terms would unjustifiably infringe upon broadcasters’ editorial autonomy. They emphasized that this action could potentially jeopardize fundamental First Amendment liberties.

In the ongoing dispute at the Federal Communications Commission (FCC), there’s talk that Redstone could decide to resolve Donald Trump’s lawsuit concerning the “60 Minutes” interview, which might mark an unexpected compromise by one of the largest media corporations towards the President.

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2025-02-08 02:58