Ariel Investments is calling on Paramount Global to be more transparent about recent board changes and ongoing merger negotiations with Skydance Media.
The company, which owned 1.8% of Paramount at the end of 2023, recently expressed concerns about exclusive discussions with David Ellison, saying avoiding a competitive bid would be “averse to fair market value.” He argued that it would be. He also warned that any deal that benefits controlling shareholder Shari Redstone at the expense of Paramount's remaining investors is “unacceptable.”
Ariel Investments Co-CEOs John Rogers Jr. and Melody Hobson said in a letter to clients on Friday that four members of Paramount's board of directors, including an independent special committee to evaluate the bid, He said that he was surprised by the announcement that members (including three members of the association) would be resigning. upcoming annual general meeting. The media conglomerate said in its proxy filing that it would reduce the size of its board of directors rather than replace them, but did not provide additional details about the departures.
“The timing was particularly concerning given the stock price decline. The lack of explanation or context in the company's proxy filing regarding these changes also made us concerned.” The two spoke. “As there was no information released by the company regarding the merger, any future director departures or reasons for reducing the size of the board, we believed that was what was next. our It is our fiduciary duty to share our concerns publicly. ”
Rogers Jr. and Hobson asked Paramount to explain recent governance changes and ensure that the remaining members are “substantially independent and capable of fulfilling their requirements and fiduciary duties in accordance with Delaware law.” I asked for it.
“Failure to do so would seriously harm not only Paramount but also shareholders like us who firmly believe in the company's fundamental values,” they said.
It also called on the board to ensure that any transaction is “focused on realizing the existing and long-term value of the company and does not simply create a premium for a single controlling shareholder.”
“If the rumors are true, a lawsuit against Paramount and its management would cause significant damage to the company's value,” they continued. “Leading to that last point, investors should not rely on rumors, speculation, or the media when considering serious corporate transactions like this. Transparent corporate filings and statements can confuse stock prices.” It will put an end to the obfuscation that has been going on.”
Additionally, the company requested that its board of directors participate in a competitive bidding process to maximize the value of the company's assets for the benefit of all shareholders.
“Given the decline in Class B stock prices, it is clear that the market does not believe that the currently proposed exclusive transaction with the parties is good for all shareholders,” they said. “Typically, when a merger transaction is announced, the stock price finds some equilibrium between the opening price and the expected closing price. With the stock hitting new lows, Paramount investors are voting on the ground. A lack of disclosure, questions about board governance and company leadership, and expectations of dilution from the rumored deal have caused the stock to rise again.
Rodgers Jr. and Hobson acknowledged that Paramount's silence “remains troubling,” but said they are “never in turmoil” and that “the fundamental value of the company's content and studio assets is recent. “We feel comfortable keeping Paramount because it's worth much more than that.” Stock price. ”
“At Ariel, our patient investment philosophy resists hasty reactions. Nevertheless, we diligently and continuously evaluate changing circumstances. We are concerned about changes in Paramount's circumstances. “We believe that mergers should not be rushed, especially under exclusive agreements and control premiums,” the letter concluded. “Instead, companies and boards have a fiduciary duty to take the time necessary to seek the right deals with the right partners at prices that promote long-term success for everyone. We will continue to monitor this extraordinary situation closely. Although we are not activist investors, we will continue to advocate for positive outcomes at Paramount for our clients and mutual fund shareholders. .”
In an interview with TheWrap, Rogers Jr. said Ariel Investments is not ruling out litigation and has already had preliminary discussions with outside counsel.
The letter comes as Skydance and Paramount continue to work out the details of a potential deal ahead of the expiration of the exclusivity period on May 3. It is unclear whether negotiations will extend beyond that date.
Apollo Global Management also made an all-cash offer of $26 billion for Paramount, but that bid was reportedly rejected due to financing concerns. The private equity firm has since entered into talks with Sony Pictures Entertainment about a potential joint bid for Paramount, but no formal offer has been made.
In addition to Ariel Investments, investors who have expressed opposition to Skydance's bid include Matrix Asset Advisors, Aspen Sky Trust and Blackwood Capital Management. Mario Gabelli, chairman and CEO of GAMCO Investors Inc., also previously warned that he could file lawsuits if the Skydance deal or other bids do not provide adequate returns to clients. Was.
Paramount stock has risen 11% in the past six months, but has fallen 48% in the past year and 17% since the beginning of the year. The company's market capitalization was $8.3 billion as of Friday's close.
