Shari Redstone plays merger and acquisition war games as Paramount CEO is removed

In what could easily be a storyline from HBO's hit series 'Succession', Big global plans to replace Chief Executive Officer Bob Bakish on Monday with a cohort of existing division heads in a chessboard-altering move designed to accelerate the company's future in some way.

Paramount is expected to announce Bakish's departure Monday before reporting earnings, which is after the markets close, according to people familiar with the matter.

The decision to fire Bakish as CEO comes as Paramount Global enters a merger agreement with Skydance Media. His departure could help force a deal.

A number of large common shareholders, including Gamco investorsAriel Investments, Matrix and Aspen Sky Trust have publicly criticized the deal, arguing that it destroys value for common shareholders. The Skydance offer would include billions in new equity, which would dilute common holders.

Meanwhile, Skydance would pay about $2 billion to controlling shareholder Shari Redstone for her 77% voting stock in the company by acquiring its holding company National Amusements, CNBC has previously reported, representing a significant premium for Redstone, whose economic interest in the company has fallen. to less than $1 billion.

The imbalance has led many at Paramount, including Bakish, to speak out against the deal, which they say only benefits Redstone.

“There is no doubt that I would rather not see a sale,” said Gamco Chairman and CEO Mario Gabelli told The New York Post earlier this month.

Redstone is now open to a so-called “majority of minority” vote on the Skydance deal, according to a person familiar with her thinking. Bloomberg And The Wall Street Journal first reported the development on Sunday.

That is an important turn in the Skydance conversations. It means minority shareholders will now have a say in whether the deal goes ahead, giving the deal's accusers potential influence over the outcome. Shares of Paramount Global rose about 5% in premarket trading Monday.

Normally, Paramount Global shareholders like Gabelli compare an offer to the standalone company's prospects — hence his comments about seeing no sales at all.

But by removing Bakish, Redstone and the Paramount Global board are now throwing the status quo into chaos. The company will no longer have a leader or a clear strategy for the future. Redstone may be trying to force common holders to opt for a sale by effectively destabilizing the company without a sale.

The exclusivity talks with Skydance end on May 3. CNBC reported last week that Skydance was moving toward valuation terms but wanted a two-week extension of exclusivity, which the special committee had not yet granted.

“National Amusements has specifically requested that Paramount's board form a special committee to exercise their dependent judgment in considering a potential transaction with Skydance,” a National Amusements spokesperson said in a statement to CNBC. “National Amusements has no role in the committee, and we respect the committee's process and its ultimate decision on whether the Skydance deal is an attractive transaction for Paramount and whether they want to continue moving forward.”

Now that it has a majority of minority votes, Skydance plans to tighten its offering to make it more attractive to common holders. Bloomberg reports this. It's unclear whether the company will be able to change the terms drastically enough to convince ordinary investors to change their minds.

A joint offer from private equity firm Apollo Global and Sony could serve as a white knight if investors don't want Skydance and have no viable no-sell option. The New York Times reported Earlier this month, the two sides held preliminary talks about a deal.

Shareholders will wait to see whether the parties make a formal offer with details of who will finance a takeover. Regulators could view a takeover by Apollo and Sony as a greater risk if the financing is provided by foreign entities. Sony is also a non-US company, which could theoretically raise concerns with the Committee on Foreign Investment in the United States, which would likely review the delay.

Meanwhile, Paramount has a major carriage renewal deal with US cable company Charter Communications in the coming days. Bakish is engaged in negotiations with Charter. It is unclear how his resignation will affect negotiations, which will play a major role in the company's valuation going forward.