Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Our long National (Amusements) nightmare is not over. After months of complex negotiations, there appeared to be a deal in place this week for media conglomerate Paramount to be taken over by the upstart studio Skydance Media.
Instead, Paramount’s controlling shareholder Shari Redstone called the whole thing off, an exasperating move for all sorts of Wall Street and Hollywood players.
Redstone’s family business, National Amusements, holds a 5 per cent economic stake but a 77 per cent voting stake, which has been the rub in trying to close a deal for Paramount. The fiasco is a reminder that dual-class shares that cleave economic interests from voting interests eventually lead to ugly and perverse outcomes — generally for those at the whim of parties who have the power to call the shots.
The handful of Paramount voting shares held by non-Redstone shareholders trade publicly at a 66 per cent premium to non-voting shares. The Skydance deal first called for three sets of cash payments. The Redstone voting shares, which have a current trading value of about $800mn, were to be bought out at something around twice that.
The stub voting shares held by others would only get bought out at around their current trading value, and half of non-voting shares would get bought out at a one-third premium but at a per-share price well below what Redstone and even the other voting shares received.
After these contortions, the private Skydance, backed by RedBird Capital and KKR, would reverse-merge into the remaining Paramount. Ordinary shareholders would then have together received a package of cash as well as a piece of the new company.
The ownership splits, however, were not shared and just how approvals and resulting litigation would be handled were key parts of the negotiation.
The Financial Times reported that Redstone baulked when Skydance shifted some of the cash it was offering away from Redstone to ordinary shareholders. Reconciling these diverging interests became impossible even though Redstone was still getting a windfall.
Now, two other parties — Edgar Bronfman and Steven Paul — are looking to buy only the controlling shares from Redstone, who has her own personal cash flow problems to solve. Why they would want to step into Paramount’s serious strategic problems with no operating asset to offer remains unclear.
As for Paramount’s ordinary shareholders, they can only feel shell-shocked and violated after a single shareholder put her interests so clearly above everyone else’s at every moment.
Read the full article here