Investor Mario Gabelli Files Lawsuit Against National Amusements Inc., Owned by Shari Redstone, Over Allegedly Unfair and Disproportionate Terms in Paramount-Skydance Merger Agreement
In a significant legal dispute, billionaire investor Mario Gabelli's investment firm, GAMCO, has filed a lawsuit against National Amusements Inc. (NAI), the controlling shareholder of Paramount Global. The lawsuit, filed in Delaware Chancery Court, alleges that the merger between Paramount Global and Skydance Media was unfair and inequitable to former Class A shareholders, including those represented by GAMCO, compared to the favourable consideration received by NAI [1][5].
The lawsuit seeks unspecified monetary damages and was filed on behalf of shareholders of the Gabelli Value 25 Fund and approximately 750 other advisory clients who held Paramount Global Class A shares prior to the merger. The lawsuit, submitted under seal and not publicly available in detail, is based on the claim that NAI and related parties received more advantageous merger consideration than other Class A shareholders, which GAMCO argues constitutes a breach of fiduciary duty and an inequitable transaction [1][5].
The lawsuit comes after GAMCO voiced its concerns early in the process and asked for more transparency regarding what NAI was receiving for their identical Paramount voting shares. Despite these requests, GAMCO was forced to redeem its shares for cash, lacking the ability to continue holding voting shares in the new Paramount entity [8].
According to the lawsuit, NAI owned about 77% of the Class A shares. However, GAMCO claims that NAI received in excess of $60/share for its Class A shares, while GAMCO and other similarly situated shareholders received a mere $23/share [9].
In addition to the lawsuit, Gabelli has urged the Federal Communications Commission (FCC) to delay regulatory approvals related to the merger, seeking time to investigate potential fiduciary and federal securities law violations against Paramount's minority shareholders [3].
The deal terms provide Redstone and other NAI shareholders "certain indemnification rights" relating to the sale, with a maximum cap of $200 million [2]. About $6 billion of the money to fund the deal came from the Ellison family (i.e. Oracle founder Larry Ellison) and about $2 billion came from RedBird [4].
Paramount produced documents that did not provide the transparency GAMCO needed to assess the fairness of the transaction to all Class A shareholders [6]. GAMCO made a "books and records" request to Paramount last year under Delaware's General Corporation law [7].
The legal dispute centers on the terms and fairness of the Paramount-Skydance merger consideration, with GAMCO asserting that NAI received disproportionate benefits at the expense of other Class A shareholders, prompting legal action and regulatory scrutiny [1][3][5].
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