The proposed $8 billion sale of Paramount Global to Skydance Media is facing a legal challenge from a class action lawsuit alleging the deal undervalues the company and harms public shareholders. A Delaware judge has agreed to expedite the lawsuit, potentially delaying the transaction’s closing.
Chancellor Kathaleen McCormick of the Delaware Court of Chancery ruled on Thursday to accelerate the proceedings brought forth by New York City employee pension funds. These funds, holding Paramount stock, contend that the company’s special committee neglected its fiduciary responsibilities by dismissing a higher bid from Project Rise Partners, valued at $13.5 billion, and favoring the Skydance offer.
The lawsuit accuses Paramount’s special committee of breaching its duties to public shareholders by not properly considering the Project Rise Partners proposal. While Chancellor McCormick acknowledged the potential harm to shareholders, she declined to issue a temporary restraining order blocking the sale, as the closing date appeared to be some time away. However, she mandated that Paramount and Skydance provide the pension funds with at least five business days’ notice prior to closing, allowing them to seek an injunction if necessary.
The controversial sale, orchestrated by Paramount’s controlling shareholder, Shari Redstone, involves a two-step process transferring her stake in the Hollywood studio to David Ellison’s Skydance. This transaction, announced in July, awaits regulatory approval from the Federal Communications Commission (FCC). According to court documents, Paramount estimates the earliest closing date to be March 20, with a deadline of April 7, subject to two possible 90-day extensions pending FCC clearance.
Following the initial Skydance agreement, Paramount initiated a 45-day “go shop” period, expiring on August 21, to solicit competing bids. This process yielded an offer from media veteran Edgar Bronfman Jr., which was later withdrawn. Had Paramount accepted an alternative proposal, a $400 million break-up fee would have been payable to Skydance.
The legal challenge casts a shadow over the future of Paramount Global and raises significant questions regarding the valuation process and the interests of public shareholders. The court’s expedited review will determine whether the $8 billion Skydance deal proceeds as planned or faces further scrutiny and potential modification.
