Shari Redstone is playing M&A war games with Paramount CEO removed

In what could easily be the plot of the HBO show “Succession,” Paramount Global It plans to replace CEO Bob Bakish with a group of current division heads on Monday in a chessboard-changing move designed to accelerate the company's future — one way or another.

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

The decision to remove Bakish as CEO comes as Paramount Global is close to concluding a merger agreement with Skydance Media. His departure casts doubt on Paramount's near-term future as an independent company, which could help force a merger agreement.

A number of major common shareholders, including Gamco Investors, Ariel Investments, Matrix and Aspen Sky Trust, have publicly criticized the deal, arguing that it destroys value for common shareholders. Skydance's bid would include billions of new shares that would dilute common holders.

Meanwhile, Skydance will pay controlling shareholder Shari Redstone about $2 billion for her 77% voting stakes in the company through the acquisition of its holding company National Amusements, CNBC previously reported, representing a significant premium for Redstone, whose economic interests in the company have declined. To less than $1 billion.

This flaw has prompted many at Paramount, including Bakish, to speak out against the deal, which they see as only benefiting Redstone.

“There's no question that I would rather not sell,” Mario Gabelli, chairman and CEO of Jamco, told the New York Post earlier this month.

This is where the CEO Monday drama begins.

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

This is an important shift in Skydance conversations. This means that minority shareholders will now have a say in whether the deal goes through, giving critics of the deal a potential sway in the outcome. Paramount Global shares jumped about 5% in pre-market trading Monday.

Paramount Global shareholders like Gabelli typically compare the offer to the standalone company's prospects — hence his comments about not seeing a sale at all.

But by firing Bakish, Redstone and the Paramount Global board are now throwing the status quo into disarray. The company will not have a clear leader or strategy going forward. Redstone may be trying to force common stockholders to opt for a sale by effectively destabilizing the company without there being a sale.

Exclusivity talks with Skydance are set to end on May 3. CNBC reported last week that Skydance was moving toward evaluation terms but wanted a two-week extension on exclusivity, which the special committee has not yet granted.

“National Amusements has specifically asked the Paramount board to form a special committee to exercise its subordinate judgment when considering a potential deal with Skydance,” a National Amusements spokesperson said in a statement provided to CNBC. “National Amusements has no role on the committee, and we respect the committee’s process and final decision on whether the Skydance deal represents an attractive deal for Paramount and whether they want to continue moving forward.”

With a majority minority vote, Skydance plans to improve its offering to make it more attractive to common shareholders, Bloomberg reported. It's unclear whether the company will be able to change the terms radically enough to persuade ordinary investors to change their minds.

A joint bid by private equity firm Apollo Global and Sony could serve as a white knight if investors don't want Skydance and have no viable option not to sell. The New York Times reported earlier this month that the two sides had held preliminary talks about reaching an agreement.

Shareholders will wait to see if the parties submit a formal offer that includes details about who is financing the takeover. Regulators could view the Apollo and Sony acquisitions as riskier if the financing is provided by foreign entities. Sony is also a non-U.S.-based company, which could theoretically raise concerns for the Committee on Foreign Investment in the United States, which would likely review the deal.

Meanwhile, Paramount has concluded an important renewal deal with US cable company Charter Communications in the coming days. Bakish was deep in negotiations with the charter. It is unclear how his dismissal will affect those negotiations, which will play a large role in the company's valuation moving forward.