New York Post: Mario Gabelli comes out against Paramount’s merger with Skydance: ‘I’d rather see no sale’

Story from New York Post:

Wall Street titan Mario Gabelli is slamming a possible merger between Paramount and Skydance Media — and says he’d rather see Paramount exit deal talks altogether, The Post has learned.

The legendary investor — whose firm through super voting shares and common Paramount stock is the second leading voting shareholder next to media heiress Shari Redstone — added in an exclusive interview with The Post that he’s also against a sale of Paramount to Apollo Global Management, which has offered $26 billion.

“There’s no question I’d rather see no sale,” Gabelli told The Post in an interview on Friday.

Last week, Paramount’s board agreed to enter exclusive merger talks with Skydance, led by CEO David Ellison, son of Oracle co-founder Larry Ellison, favoring the independent studio over the $26 billion offer from Apollo.

As part of the deal, Skydance, which has produced blockbusters for Paramount like “Mission: Impossible — Dead Reckoning,” and “Top Gun: Maverick,” would nab Redstone’s stake in National Amusements, the privately held company that owns almost 80% of the voting shares of Paramount Global, for around $2 billion.

Gabelli, however, told The Post that he prefers the company to stick with the turnaround strategy of Paramount president and CEO Bob Bakish.

“I’m a firm believer in what Bakish is doing and I think he can pull it off and the stock will be worth substantially more,” Gabelli said.

That’s despite the fact that the company’s shares are trading at around $11 a share Friday, well off its 52-week high of $24 a share.

Gabelli said he expects shares will bounce back to $28 by the end of this year and $41 in 2027 without any sale,

Although Gabelli said it was obvious Redstone is financially pressed to make a move, he believes Paramount would be better off paying down debt by selling TV channels including CBS, Comedy Central, MTV and BET Media Group but remain independent.

Redstone put BET Media Group up for auction last year but she canceled the sale as bids from prospective buyers including media mogul Tyler Perry were disappointing.

Media mogul Byron Allen made a bid at Redstone’s asking price of roughly $3 billion, but it was unclear if he had the financing.

Allen has also expressed interest in buying Paramount’s cable channels for $14 billion.

“I’d find a way to let Byron Allen get the TV channels and deleverage,” Gabelli said.

Gabelli also noted that he likes what Hollywood studio Lionsgate is doing in merging its company with a special acquisition vehicle and splitting off its Starz movie channel.

He believes Paramount’s various TV networks’ Ebitda, or earnings before interest, taxes, depreciation, and amortization, will fall about 10% between now and 2027 to $4.3 billion due to cord cutting.

The big growth, Gabelli projects, will be the direct to consumer side.

Streaming, including Paramount Plus, will break even in 2026 and become profitable the following year generating over $600 million in Ebitda, he said.

Additionally, in 2027 the value of Paramount’s TV and streaming businesses (including Showtime) will be about the same, $19 billion each, he said, adding that he believes the studio will become profitable this year and be worth $1.8 billion in 2027.

Earlier this week, Gabelli — who joins a a growing number of shareholders coming out against the Skydance deal — expressed his annoyance at the fact that his clients might not get a premium as those who owned voting stock should a deal be reached.

“The notion of National Amusements getting a premium for their voting stock is totally warranted,” Gabelli told The Los Angeles Times on Wednesday. “The question is how much. My clients want to be treated the same as the voting stock. All voting stock should be treated equally.”

He went further on Thursday, telling Reuters: “If Shari sells voting stock and my clients don’t get it, I have no choice but to sue.”

Paramount Global’s shareholders have become increasingly vocal in their opposition to the deal, insisting that a merger with Skydance would mainly benefit Redstone, with some threatening legal action.

Earlier this week, news broke that four directors — Nicole Seligman, Dawn Ostroff, Frederick Terrell and Rob Klieger — are set to step down at the company’s annual meeting on June 4, sparking concerns over the Skydance deal.

At least one of the directors who is leaving the board also expressed concerns about the potential Skydance deal, according to the Journal.

"We are not surprised, but cannot think of a stronger statement against the proposed Skydance deal,” said Loop Capital analyst Alan Gould of the board situation in a note Thursday.

At least three funds have publicly shared angry letters sent to Paramount with Matrix Asset Advisors calling a potential deal with Skydance “detrimental” to the company.

Matrix said it was “especially galling” that the Paramount board has not seriously considered Apollo’s offer due to reported concerns about deal financing.

On Friday, Barrington Capital also asked Paramount to consider Apollo’s offer.

The anger from shareholders, however, may just be a distraction.

Redstone needs the Paramount special committee to approve her merger, but likely not the independent Paramount shareholders including Gabelli, sources close to the situation said.

Shareholders will likely sue Paramount–and perhaps directors — if a merger they don’t like is approved, but it will be very hard for them to stop a merger, sources said.

Another, less discussed scenario for Redstone, may be refinancing.

A source close to Redstone’s holding company National Amusements said NAI creditors would likely refinance the company’s $180 million in debt if Redstone asked before principal becomes due in May 2025.

Redstone and Paramount reps declined to comment.

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