Building the Empire: Media mogul Sumner Redstone rose to prominence by building Viacom into a giant, encompassing powerhouses like MTV, Nickelodeon, and Paramount Pictures. National Amusements (NAI), a holding company controlled by the Redstone family, was the key player behind this growth. In 2000, NAI further expanded its media reach by acquiring CBS for Viacom.
The Split (2006): Just seven years later, in a move that surprised many, Sumner decided to de-merge Viacom and CBS. This unexpected decision, sparked questions about his motives and potential disagreements with CBS leadership. Reports also surfaced that Verizon, a major telecommunications company, expressed interest in acquiring CBS around this time. However, these talks never materialized.
Enter Shari Redstone: Sumner's daughter, Shari Redstone a lawyer by profession, became increasingly involved in the family business, particularly NAI's holdings in Viacom and CBS. She disagreed with the de-merger, believing that a combined Viacom and CBS would be a stronger competitor in the evolving media landscape and could be sold for more together rather than separate.
Conflict and Lawsuits: As Sumner's health and mental capacity declined, a series of lawsuits erupted, centered on control of NAI and its holdings in Viacom and CBS. Shari clashed with Sumner's confidantes, including Philippe Dauman, CEO of Viacom, and Manuela Hernandez, Sumner's girlfriend.
Shari vs. The Confidantes: Shari suspected these confidantes were manipulating her father, who was in his 80s and allegedly experiencing health issues. She made serious allegations, claiming they were influencing his decisions, including the Viacom/CBS split, his control of NAI, and his healthcare, for their own benefit. The most sensational allegation centered around Sumner's mental capacity and Hernandez's influence. Shari claimed Hernandez was manipulating Sumner and even hired prostitutes for him.
Legal Battles and Public Scrutiny: Shari filed lawsuits to gain control of NAI, which ultimately determined who would have voting power in Viacom and CBS. These lawsuits became very public and exposed the explosive allegations about Sumner's mental state and the influence of his confidantes.
Shari's Tyranny Begins: The legal battles were ultimately settled. Shari emerged victorious, gaining control of NAI and its voting shares in Viacom and CBS. This effectively gave her the power to reunite Viacom and CBS, which she had always advocated for.
Shari's First Violation of "Fiduciary": Verizon Communications Inc. was interested in buying CBS Corp. before merger discussions between Viacom Inc. and CBS heated up, unnamed sources told Deadline. Citing a court filing, Deadline reported May 14 that CBS disclosed the interest of another would-be acquirer, but Shari Redstone, who controls CBS through her family-owned National Amusements Inc., discouraged the potential bidder from proposing a deal. Verizon was reportedly engaged in high-level talks with CBS last year, but it is unclear how far the talks progressed.
CBS earlier sued National Amusements, which holds nearly 80% of the voting stock in both CBS and Viacom, accusing it of breaching its fiduciary duty. The lawsuit also requested the court to block National Amusements from interfering with a special meeting of the board of directors, at which the directors will consider declaring a dividend that would significantly dilute National Amusements' voting power in CBS. Specifically, the directors are looking at declaring a dividend of class A common stock to all of the company's class A and class B stockholders. If issued, the dividend would dilute National Amusements' voting interest to 17%. CBS said this move would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.
ViacomCBS Merger: Against all shareholder desires, in 2019, Viacom and CBS finally merged, creating ViacomCBS (now known as Paramount Global). Mario Gabelli considered suing Viacom over the merger while a multiyear lawsuit ensued between CBS and Shari Redstone. The settlement was eventually reached.
Streaming Wars: Despite Wall Streets wishes for Paramount Global to become an arms dealer in the streaming wars, Shari Redstone forced Paramount Global to invest billions in a speculative streaming service.
Value Investors: Many value investors were attracted to the valuable assets Paramount Global owns on one of which is the crown jewel Paramount Pictures estimated to be worth $30,000,000,000 by Steven Cahall: "At 5x EV/Licensing for Paramount Studios (since we're now in higher cost of capital times) PARA's studios are worth ~$30bn"
"Skydance Merger": Recent leaks reveal a highly dilutive merger between Paramount Global and Skydance which involves a two step transaction.
- Skydance bails out the pandemic- induced financially troubled NAI for $2 Billion cash
- Merge Skydance into Paramount Global and issue $5 Billion in equity
Minority Shareholder dissent: big money such as Matrix Asset Advisors have blasted the board for entertaining while rejecting a $30 Billion bid from Byron Allen and $26 Billion bid from Apollo — following up with threats of lawsuits. Even small regards from reddit are spamming the investor relations.
If it isn't obvious, this deal clearly favors Shari Redstone over all investors.
- Bailing out NAI shouldn't even be relevant to the merger
- The equity given to Skydance in the proposed merger is highly dillutive, which would be lower if not the $2 Billion cash payment to NAI — remember cash is not always a 1 to 1 match in equity.
Shari Redstone's history of violating fiduciary responsibility continues as she currently positions NAI (a clear conflict of interest) between any potential M&A deal to unlock "shareholder value".
It is a shame to see a company like PARA sit one tremendously valuable assets, yet the stock plummet 80% from ATH.
History may not repeat itself, but it sure rhymes.
PUTS???
p.s. If you wonder why Berkshire sold during the rally in Q4 2023, the bid from Apollo and Byron estimate the B shares right around his exit price of $16-$17 per share.
