Shari Redstone Plays M&A War Games With Paramount CEO Removal

In what could easily be a plot from the hit HBO series “Succession,” Paramount Worldwide plans to replace CEO Bob Bakish on Monday with a cohort of existing division heads, in a game-changing move intended to accelerate the company’s future — one way or another.

Paramount is expected to announce Bakish’s departure Monday before releasing its results, or after the close of trading, according to people familiar with the matter.

The decision to remove Bakish as CEO comes as Paramount Global enters into a merger agreement with Skydance Media. His departure could help seal a deal.

A number of significant common shareholders, including Gamco Investors, Ariel Investments, Matrix and Aspen Sky Trust, publicly criticized the deal, arguing that it destroyed value for common shareholders. Skydance’s offer would include billions in new equity that would dilute common shareholders.

Meanwhile, Skydance would pay majority shareholder Shari Redstone about $2 billion for her 77% voting stock in the company by acquiring its holding company National Amusements, CNBC previously reported, which would represent a premium important to Redstone, whose economic interest in the company declined. less than a billion dollars.

This imbalance has led many at Paramount, including Bakish, to speak out against the deal, which they see as only benefiting Redstone.

“There’s no question that I would prefer that there be no sale,” Mario Gabelli, Gamco’s chairman and CEO, told the New York Post earlier this month.

That’s where Monday’s CEO drama begins.

Redstone is now open to a so-called “majority minority” vote on the Skydance deal, according to a person familiar with its thinking. Bloomberg and the Wall Street Journal first reported the development on Sunday.

This is an important turning point in the Skydance negotiations. This means that minority shareholders will now have a say in whether the deal goes through, giving the deal’s detractors potential influence over the outcome. Shares of Paramount Global jumped about 5% Monday in premarket trading.

Typically, Paramount Global shareholders such as Gabelli would weigh an offer against the prospects of the standalone company – hence his comments that there would be no sale at all.

But by removing Bakish, Redstone and the Paramount Global board are now throwing the status quo into chaos. The company will no longer have a leader or a clear strategy for the future. Redstone may be attempting to force common shareholders to choose a sale by effectively destabilizing the company without such a sale.

Exclusive negotiations with Skydance are expected to end on May 3. CNBC reported last week that Skydance was closing in on valuation terms, but wanted a two-week exclusivity extension, which the special committee had not yet granted.

“National Amusements has specifically requested that the Paramount board of directors form a special committee to exercise its dependent judgment in considering a potential transaction with Skydance,” a National Amusements spokesperson said in a statement provided at CNBC. “National Amusements has no role on the committee, and we respect the committee process and the final decision as to whether the Skydance deal presents an attractive transaction for Paramount and whether they want to continue moving forward.”

With a majority of minority votes in place, Skydance plans to sweeten its offer to make it more attractive to common shareholders, Bloomberg reported. It’s unclear whether the company will be able to change the terms radically enough to convince ordinary investors to change their minds.

A joint bid from private equity firm Apollo Global and Sony could serve as a white knight if investors don’t want Skydance and don’t have a viable no-sale option. The New York Times reported earlier this month that the two sides had held preliminary discussions about a deal.

Shareholders will wait to see if the parties present a formal offer with details on who is financing an acquisition. Regulators could view an acquisition by Apollo and Sony as riskier if financing is provided by foreign entities. Sony is also a non-US based company, which could theoretically raise concerns from the Committee on Foreign Investment in the United States, which would likely review the delay.

Meanwhile, Paramount has reached a major distribution renewal deal with US cable company Charter Communications in the coming days. Bakish is engaged in extensive negotiations with Charter. It is unclear how his withdrawal will affect these negotiations, which will play an important role in the company’s valuation in the future.