How does the forced cash payment compare to the consideration offered to other shareholders in the merger?
Answer
The merger between Paramount Global and Skydance Media is being structured so that all current holders of Paramountâs ClassâŻA voting shares must be bought out in cash.âŻBecause GAMCO Asset ManagementâŻInc. holds roughly 12âŻ% of those ClassâŻA shares on behalf of its clients, the âforced cash paymentâ it will receive is the same cashâonly consideration that every other ClassâŻA shareholder is being required to accept under the dealâs terms.
How the cashâonly treatment of ClassâŻA shares differs from the treatment of other shareholders
| Shareholder group | Form of consideration in the merger | What the GAMCO cash payment looks like relative to this |
|---|---|---|
| Paramount ClassâŻA voting shareholders (e.g., GAMCO, other institutional and retail investors) | Cash only â the merger agreement does not allow these shareholders to retain any equity in the combined company. The cash is paid at a preâset perâshare price that reflects the value assigned to the ClassâŻA stock in the transaction. | GAMCOâs forced cash payment is identical in structure and price to what any other ClassâŻA holder will receive. It is not a special or separate arrangement; it is simply the outcome of the mergerâs cashâonly buyâout of this share class. |
| Paramount ClassâŻB (nonâvoting) shareholders | Cash and/or shares of the combined entity â the merger contract typically provides ClassâŻB holders with a mixture of cash and newlyâissued shares (or a cashâplusâshare option) that reflects a premium to the preâmerger market price. | The cash GAMCO receives is generally less flexible than what ClassâŻB shareholders may obtain, because ClassâŻB holders can stay invested in the postâmerger company and potentially benefit from any upside. |
| Skydance Media shareholders (the âtargetâ side) | Shares of the combined company â Skydance owners are being exchanged for a proportionate stake in the new ParamountâSkydance entity, often at a valuation that includes a control premium. | Unlike GAMCOâs cashâonly receipt, Skydance shareholders will continue to own equity in the combined business, giving them exposure to future growth rather than a fixed cash amount. |
| Other nonâvoting or preferredâstock holders | May receive cash, preferredâstock, or a combination of cash and common shares depending on the specific rights attached to those securities. | Again, the cash GAMCO receives is more limited because it does not include any ongoing equity participation. |
Key points to understand the comparison
Uniform cash price for ClassâŻA shares â The merger contract sets a single cash price per ClassâŻA share (often derived from a âfairâvalueâ analysis). All ClassâŻA holders, including GAMCO, receive that same amount per share; there is no variation based on size of the holding or client status.
No continuation rights for ClassâŻA shareholders â The deal explicitly states that âcurrent holders of the ClassâŻA voting stock have no opportunity to continueâ in the combined company. Consequently, the only way for GAMCO (and any other ClassâŻA holder) to exit is through the cash payment.
Potential premium for other shareholders â Because the merger is a âcombinationâ rather than a straight cash acquisition, the parties negotiating the transaction typically grant a premium to shareholders who will stay invested (e.g., Skydance shareholders receiving shares, ClassâŻB shareholders receiving a mix of cash and shares). This premium is absent for ClassâŻA shareholders, whose consideration is purely the cashâout price.
Liquidity vs. upside â The forced cash payment gives GAMCO immediate liquidity, which can be attractive for a fiduciary manager that must act in the best interest of its clients. However, it also means GAMCOâs clients forego any potential upside that could be realized if they remained shareholders in the postâmerger entityâa benefit that other shareholders (ClassâŻB, Skydance, preferredâstock holders) retain.
Tax and accounting implications â A cashâonly buyâout is generally treated as a capitalâgain event for the seller, whereas receipt of shares can be structured as a taxâdeferral or a taxâfree reorganization under certain jurisdictions. Thus, the cash payment may have a different afterâtax impact on GAMCOâs clients compared with the mixedâconsideration received by other shareholders.
Bottomâline comparison
- GAMCOâs forced cash payment = the same cashâonly consideration that every other Paramount ClassâŻA voting shareholder receives.
- Other shareholders (ClassâŻB, Skydance, preferredâstock, etc.) receive a more diversified considerationâoften a blend of cash **plus equity in the combined companyâgranting them continued ownership and the potential for future upside.**
- Consequently, the cashâonly treatment is more restrictive and potentially less valuable in the long term than the mixedâconsideration packages offered to the nonâClassâŻA shareholders, even though it does provide immediate liquidity.
Because the news release does not disclose the exact cash price per share or the specific premium applied to other classes, the comparison above is based on the structural differences outlined in the merger terms.