Mario Gabelli, the longtime fund manager who has made noise over the past two years about the terms of the Paramount-Skydance merger, has sued former Paramount controlling shareholder Shari Redstone.Gabelli, chairman of New York-based Gamco, filed suit against Redstone and National Amusements, the company that held the controlling stake in Paramount shares, in Delaware Chancery Court on Wednesday. He is seeking class-action status for the complaint. Along with other shareholders, Gabelli complained that Redstone carved out a sweetheart deal for herself and her family, coming away with $2.4 billion in proceeds from the merger while other investors were left at a disadvantage.The $8.4 billion transaction closed last Thursday after a tortuous regulatory process. CEO David Ellison and his executive team met the media Wednesday as Paramount shares went into orbit for no immediately apparent reason, surging 37%. The explosion puzzled market watchers given the small amount of shares available to the public.Christopher Marangi, Co-CIO at Gamco, said the firm “has an obligation to pursue this case on behalf of its clients. Gamco voiced its concerns early in the process and asked at minimum for more transparency regarding what NAI was receiving for their identical Paramount voting shares.”Gabelli’s firm launched what it called “Project Fishbowl,” an initiative designed to create more transparency around the dealings of NAI, a privately held company. Based on public documents and statements of Paramount board members, Marangi said, the investment firm concluded that NAI got $60 a share for its Class A shares, while Gamco and other Class B holders got just $23.During the bidding process, an earlier Skydance offer was revised by the parties after considerable objections were raised by Gabelli and other investors. While the offer was in many respects sweeter, the suit contends it did not substantially improve the standing of Class B shareholders.The company also asked for minority shareholders to be allowed to vote on the Skydance deal, Marangi added, noting that such votes are not uncommon in transactions involving control of a company.The firm’s concerns “were ignored and, lacking the ability to continue holding voting shares in the new Paramount entity, Gamco was forced to redeem its shares for cash,” Marangi continued. We now look to the courts to rectify the situation.”
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