WILMINGTON, Del. — A Delaware court is setting the stage to tackle a class action lawsuit aimed at halting the proposed $8 billion acquisition of Paramount Global by Skydance Media. The legal challenge raises concerns about the transaction’s fairness to Paramount’s public shareholders, spotlighting the influential role of the company’s controlling shareholder, Shari Redstone.
The judicial scrutiny unfolds following Redstone’s decision to divest her Paramount stake to David Ellison’s Skydance Media in July, under a deal that is still pending regulatory approval. The strategic shift to Skydance, a burgeoning force in the streaming sector, has prompted significant rival bids and subsequent legal friction.
Earlier this year, a collective of investors known as Project Rise Partners launched a $13.5 billion bid to acquire Paramount. Despite the higher offer, Paramount’s special committee dismissed this bid, prompting a lawsuit from pension funds representing New York City employees who are shareholders in Paramount. The funds allege that Paramount’s board did not act in the shareholders’ best interests.
Presiding over the case, Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled on Thursday that although the pension funds had demonstrated sufficient harm to expedite the lawsuit, the absence of an immediate threat to close the sale meant a temporary restraining order (TRO) was unnecessary at this juncture.
However, the court mandates that Paramount and Skydance provide the pension funds with at least five business days’ notice before finalizing the deal, allowing them an opportunity to seek a restraining order to block the sale at that time.
Adding to the complexity of the deal is a concluded 45-day “go-shop” period mandated in the agreement, intended to enable Paramount to seek and assess alternative proposals. During this period, media tycoon Edgar Bronfman Jr. extended an offer, which he later retracted, paving the way for Skydance Media’s acquisition plans.
The proposed merger’s consummation hinges on the approval from the Federal Communications Commission (FCC). Paramount anticipates the earliest closure date of the deal to be March 20, with flexibility for an extension until April 7 if necessary. The terms also permit two additional 90-day extensions should further regulatory approvals be required.
This pending acquisition of Paramount not only underscores the competitive tensions within the media industry but also highlights the intricate dance between corporate strategy and shareholder interests. As this transaction moves forward, it will likely serve as a prominent case study on the balance of power in major corporate dealings and the accountability mechanisms in place for those in the steering roles of such influential enterprises.
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