Scoop: Paramount bidder claims its offer was wrongly spurned

Zoom in: The bidding group, called Project Rise Partners (PRP), argues its bid is superior to Skydance's from a financial perspective, offering more cash per share to both Class A and Class B shareholders in Paramount.

Zoom out: Typically, a publicly traded corporation is legally bound to consider any legitimate offer of value that could benefit shareholders — but there are plenty of rationales a board can use to dismiss an offer, too.

How it works: PRP is comprised of two entities, according to the letter: Rise Beyond LLC and Malka Investment Trust.

• Those two entities are funded mostly by wealthy individuals in media, real estate, telecom, hospitality and finance.
• Rise Beyond's CEO Daphna Edwards Ziman is the president and co-chairman of Cinémoi, a film and lifestyle TV network. Malka's Moses Gross is the founder and CEO of ANM Group, a real estate company.

State of play: Lawyers representing PRP's bid argue in the Oct. 8 letter that their client's offer should have been considered and that the special committee's excuse for dismissing it due to timing doesn't hold.

• As part of Paramount's July deal with Skydance Media, led by Hollywood producer David Ellison, Paramount's special committee agreed to a go-shop window which allowed it to consider higher or equivalent bids for the company for 45 days.
• PRP's lawyers argue the go-shop provision is unenforceable, citing a Supreme Court precedent.
• "Because the Offer was timely, and because fiduciary duties under Delaware law require it, the Offer must be submitted to the Special Committee or Board for assessment," the lawyers write.

Between the lines: According to the letter, the group made a verbal offer via a Zoom call to Charles Phillips Jr., a member of Paramount's special committee, before the end of the go-shop period on Aug. 18.

• They said the group sent a written offer to Phillips Jr. via email on Aug. 26, five days after the go-shop window originally closed.
• Additional details about the bid were emailed on Sept. 9 to Centerview's Blair Effron, a partner at the bank advising Paramount, and Cravath's Faiza Saeed, a partner at the law firm representing the special committee.

Of note: The go-shop period was extended by 15 days on Aug. 21 to consider a separate offer from an investment group led by billionaire Edgar Bronfman Jr. That extended the go-shop window to Sept. 5.

• That bid was eventually dropped after Bronfman Jr.'s group failed to raise enough cash in time. The PRP bid was not considered, per the letter, despite being higher and all-cash.
• Representatives from BakerHostetler, the law firm representing the bidders, declined to comment. Representatives from Paramount, Skydance and NAI declined to comment.

The other side: The special committee suggested in a statement that the go-shop provision extension only applied for Bronfman's bid.

• "The transaction agreement between Paramount and Skydance Media enabled the Special Committee to pursue a superior proposal during the now-expired 45-day go-shop period. Rise Beyond LLC and Malka Investment Trust d/b/a Project Rise Partners ("PRP") did not make a proposal during such period, nor during the prior seven month sale process for Paramount."

• "It is unclear what PRP's objectives are; however, Paramount is bound by its agreement with Skydance Media and there will not be any engagement with PRP in contravention of such agreement."

By the numbers: Lawyers for PRP argue in the letter that PRP's bid is superior to Skydance's because the all-cash bid is valued higher and doesn't dilute class B shareholders.

• Its bid includes an $8.5 billion cash offer, which includes $2.5 billion in equity and an additional $5 billion in debt restructuring. Paramount's balance sheet would get a $2 billion equity infusion.
• The Skydance deal is valued at $8.4 billion. The transaction values Skydance at $4.7 billion. Skydance's bid also includes a $2 billion+ cash infusion.
• Some shareholders have expressed frustration with the Skydance deal, arguing that issuing new Class B shares to cover Paramount's buyout of Skydance would dilute current Class B shareholders.
• Bronfman's final bid was valued at $6 billion.

Zoom out: The letter includes materials from PRP's bid, including a strategic plan for Paramount.

• The bidders say they are "highly interested" in acquiring Paramount, taking it private to "restructure and enhance" every division of the company "to increase value and profitability."
• Their strategy includes folding satellite communications companies into Paramount and launching a constellation of satellites to better distribute Paramount's content. (Paramount's two biggest assets, CBS and Viacom, are currently distributed through broadcast and cable, respectively.)
• It also plans to make real estate investments in the company that would appeal to tourism. "Paramount City will be built as a centerfold for the entertainment industry embracing tourism, hospitality and high-end retail enabling an elevated view of a new Los Angeles." the bid reads.

Go deeper: More on the Paramount-Skydance deal