A potential merger between media companies Skydance and Paramount Global ( PARAA ) has dominated headlines and could see further consolidation in the media sector.

One shareholder of Paramount Global ( PARAA ) is calling out the merger efforts, which could provide cash to Shari Redstone and leave Paramount shareholders with a diluted value.

What Happened: Skydance entered into an exclusive negotiating window with Paramount Global ( PARAA ), according to reports.

A potential merger would see Redstone's National Amusements, which owns 77% of voting shares of Paramount, receive $2 billion in cash. Paramount Global ( PARAA ) would acquire Skydance in an all-stock deal valued at around $5 billion, according to reports.

Current Paramount shareholders would receive shares in the newly merged company and have diluted ownership.

Paramount shareholder Matrix Asset Advisors sent a letter to the media company's board of directors sharing its disgust in the consideration of "actions that are only in the interest of one shareholder."

Matrix Asset Advisors President and Chief Investment Officer David Katz said the Paramount board could be ignoring and "massively diluting" the existing shareholders of Paramount.

"We urge the Board to exercise its fiduciary responsibility and obligation, by prioritizing actions that serve the best interests of ALL Paramount shareholders," Katz said in an email obtained by Benzinga. "It is imperative that any proposed transaction be thoroughly evaluated to ensure it maximizes shareholder value."

Katz said Matrix Asset Advisors opposed to any deal that diluted existing shareholders or failed to "reflect the true value of the company." The investor encouraged other shareholders to publicly or privately send messages to Paramount's board.

A letter from Matrix Asset Advisors said the investment firm holds 355,445 shares of Paramount directly or on behalf of clients.

"We remain confident in Paramount's potential for long-term value creation under the stewardship of CEO Bob Bakish and the current management team. We fully support the strategy set by Mr. Bakish and endorsed by the Board, and are very pleased with the progress the company has made since the 2022 strategy announcement," the letter reads.

The letter said a continued turnaround of Paramount could boost shareholder value in the next 12 to 18 months.

"The intrinsic value of Paramount's unparalleled portfolio of assets is well above the company's stock price."

Katz called the deal with Skydance "sub-optimal" and said the deal only prioritized the interests of Redstone, calling the rumored deal a "home run for Ms. Redstone."

"The vast majority of shareholders would not receive a similar premium and would be forced to finance a speculative investment in Skydance in a transaction significantly dilutive to shareholder value."

The letter also questioned why the board of Paramount is not seriously considering a reported $26 billion offer from Apollo Global Management and was exclusively negotiating with Skydance.

Related Link: Paramount, Skydance Deal Talks Fuel Investor Interest But Charts Indicate Mixed Sentiments

Why It's Important: The letter from Matrix Asset Advisors came after media analyst Rich Greenfield of LightShed Ventures shared similar concerns about ignoring the Apollo bid and considering diluting existing Paramount shareholders.

"As we've been writing, $PARA Board unwilling to terminate management and make the hard decisions to save Paramount. Instead, National Amusements set to make $2 billion, while public $PARA shareholders are massively diluted," Greenfield tweeted.

In a recent interview with CNBC, Greenfield said he was surprised Paramount turned down a reported $26 billion all-cash bid from Apollo.

"It just doesn't make sense to me or any of the investors I've been talking to."

One investor who has remained quiet on the potential of a merger or buyout of Paramount is Berkshire Hathaway Inc (NYSE:BRK) CEO Warren Buffett. Berkshire owns a stake in Paramount and could be influential about any decision made to maximize returns for shareholders.

Buffett previously bashed the streaming business, which led to speculation that his investment in Paramount was likely more of a play on a potential buyout and less so for the potential growth of the Paramount+ streaming business.

PARA Price Action: Paramount shares are down 5.35% to $11.33 on Monday versus a 52-week trading range of $10.16 to $24.

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