Delaware Judge Considers Class Action Lawsuit Over Paramount Sale to Skydance Media

A Delaware judge has signaled a willingness to examine allegations in a class action lawsuit that seeks to block Paramount Global’s $8 billion sale to Skydance Media, claiming the deal undercuts public shareholders, according to a court filing on Thursday.

The lawsuit follows a two-step agreement struck by Paramount’s controlling shareholder, Shari Redstone, in July to sell her stake in the company to Skydance Media, a rapidly growing player in the streaming industry led by David Ellison. The deal is currently awaiting regulatory approval before it can close.

In response to the transaction, a group of investors known as Project Rise Partners proposed a $13.5 billion offer to acquire Paramount earlier this year. However, Paramount’s special committee rejected the bid, which led to legal action from pension funds representing New York City employees who hold stock in the company. These pension funds argue that Paramount’s board violated its fiduciary duties by dismissing the Project Rise Partners proposal.

Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled on Thursday that while the pension funds have shown sufficient harm to fast-track the lawsuit, there is no immediate threat of the deal closing. Therefore, she declined to grant a temporary restraining order (TRO) to block the sale. McCormick noted in her eight-page ruling that, “Although plaintiffs have demonstrated harm sufficient to support expedition, there does not seem harm proximate enough to warrant a TRO.”

Read more: Paramount Explored Warner Bros. Merger Before Skydance Deal

The ruling also established that Paramount and Skydance must notify the pension funds at least five business days before the deal is finalized, giving the funds an opportunity to seek a TRO at that time.

The $8 billion deal includes a 45-day “go-shop” period, during which Paramount was allowed to solicit and evaluate other offers. That period concluded on August 21, and the company weighed a competing offer from media mogul Edgar Bronfman Jr., which was ultimately withdrawn. This cleared the way for Skydance Media to acquire Redstone’s controlling interest in the studio.

Per Reuters, the merger remains contingent on approval from the Federal Communications Commission (FCC). According to McCormick’s ruling, Paramount stated that the earliest the deal could close is March 20, although the deal could be extended until April 7 if FCC approval is not granted by then. Additionally, the deal allows for two 90-day extensions if necessary.

Source: Reuters