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Edgar Bronfman Submits $4.3 Billion Bid for Redstone’s National Amusements, Paramount Stake

Bronfman is looking to scuttle a previous agreement to merge Paramount with David Ellison’s Skydance Media

Media executive Edgar Bronfman Jr. is formally making his play for Shari Redstone’s media empire, in an attempt to scuttle a previous agreement to merge Paramount Global PARA 0.64%increase; green up pointing triangle with David Ellison’s production company Skydance Media.

Bronfman has submitted a $4.3 billion offer for National Amusements, the company through which Redstone’s family controls the media giant, and a minority stake in Paramount Global, according to people familiar with the situation.

As part of the offer, Bronfman has proposed buying National Amusements in an equity deal valued at $1.75 billion, equal to what Skydance has offered for Redstone’s company, plus investing $1.5 billion onto Paramount’s balance sheet, also similar to what Skydance has offered, the people said.

The figure also would cover a $400 million breakup fee owed if Paramount chooses to go with an offer other than Skydance.

Bronfman, who formerly ran Warner Music and liquor giant Seagram, has secured financing commitments primarily from high net-worth individuals and family offices, the people said. He has also teamed up with movie producer Steven Paul, who previously expressed interest in National Amusements.

The new offer marks the latest twist in a monthslong effort to sell Paramount, which owns CBS, cable networks Comedy Central and Nickelodeon, the Paramount+ streaming service and movie studio.

Last month, Redstone agreed to sell National Amusements to Skydance Media, run by David Ellison, the son of billionaire Oracle co-founder Larry Ellison. Under that deal, Skydance and its investors have agreed to spend more than $8 billion to acquire National Amusements and then merge Skydance into Paramount, creating a new iteration of the iconic business.

Under the terms of that deal, Skydance agreed to buy National Amusements in a transaction with an equity value of $1.75 billion. Skydance and its investors agreed to put $1.5 billion on Paramount’s balance sheet, which it can use to pay down debt.

Skydance is committing another $4.5 billion that Paramount can use for an offer to buy out about 50% of nonvoting shares at $15 each, or can roll into the new company. Non-Redstone voting shareholders would be eligible to cash out for $23 a share or roll into the new company as nonvoting shareholders.

The Skydance deal is subject to a “go-shop period,” when other potential buyers can make offers, which ends on Wednesday.

Now it is up to a special committee of directors at Paramount to decide if Bronfman’s bid “is or would reasonably be expected to lead to a superior proposal,” relative to Skydance’s offer, and thus warrants extending the go-shop period for another two weeks, according to the Skydance deal terms.

Skydance declined to comment.

Bronfman’s pitch is that his deal is better for Paramount shareholders because they wouldn’t be diluted like they would be in the Skydance deal, under which Paramount would buy Skydance in an all-stock transaction. Many Paramount shareholders have voiced concerns about the Skydance deal because they say it is a sweetheart deal for Redstone.

In a letter sent on Monday evening, Bronfman related to Paramount’s special committee that he has financing commitments for about $5 billion, the people said.

Bronfman still faces a significant challenge in getting the deal done. Under the terms of Redstone’s deal with Skydance, Skydance has the right to improve the terms of its deal.

Bronfman, who has served as the executive chairman of sports-centric streaming service Fubo since 2020, has discussed bringing in new partners from the technology and other industries for possible strategic partnerships, should he take over Paramount, The Wall Street Journal previously reported.

Bronfman separately scored a major victory last week following his company Fubo’s suit against Warner Bros. Discovery, Fox Corp.and Disney for announcing the launch of a joint venture earlier this year. On Friday, a judge blocked the new sports streaming service from debuting, dealing a major blow to the three companies’ efforts.

H2O vs FCA: a case study in not moving on from a scandal

Regulators must show pragmatism as well as toughness but playing legal mediator, rather than policeman, looks odd

Loïc Guilloux is desperate to draw a line under the past. The boss of French asset manager H2O this month oversaw a final notice agreement with the UK’s Financial Conduct Authority, ending a years-long investigation into the group’s dealings with controversial German financier Lars Windhorst.

The FCA imposed no regulatory fine on H2O (in contrast to France’s Autorité des Marchés Financiers, which last year levied a €93mn penalty over related issues). It took the view that a fine would deprive out-of-pocket investors of funds that could be used to reimburse them, and so mediated instead the creation of a €250mn compensation pot (which investors can tap quickly only if they agree not to sue). The FCA also allowed H2O to “voluntarily apply to cancel” its UK regulatory licence, rather than stripping it forcibly. 

This is the same H2O that was once a star European investment manager, overseeing more than €30bn. And the same H2O that then lost more than €1bn of investors’ money (the precise amount is disputed) after the group, under former chief executive Bruno Crastes, breached investment rules, short-circuited due diligence norms and struck an extraordinarily close relationship with Windhorst, detailed in a series of FT articles. 

Despite the FCA’s ultimate leniency, it says H2O “failed to carry out proper due diligence” and failed to declare hospitality connected to the close family friendship between Crastes and Windhorst. H2O provided the regulator with “false and misleading statements and documentation”, including “fabricated records and minutes of meetings”.

But Guilloux, who is understood to have proposed the voluntary compensation pot, clearly charmed the regulator. The final notice praises H2O’s “measures to significantly enhance its governance, systems and controls to ensure that similar misconduct will not occur in future”. The rationale is logical enough: a clean-up CEO (Guilloux replaced Crastes at the start of last year) should be given a fair chance to move on.

Except there are some glaring reasons why H2O cannot credibly be seen to be moving on. 

Chief among them is that Crastes, a co-founder of H2O, is still employed in a senior capacity — overseeing market strategy — at the group. Not only that. There is apparently a desire for him to return to active fund management, once a five-year AMF ban on him managing money has expired. Such a scenario would be unthinkable in many jurisdictions.

Vincent Chailley, who was H2O’s chief investment officer when the scandal took place, remains in that role. He may have expressed repeated discomfort with the Windhorst investments, but he was ineffectual in obstructing them. (Only one top-ranking executive has left, due to risk and compliance failures.)

Guilloux himself is not exactly a wholly new broom, either. He was co-CEO with Crastes for a period before the AMF action, and had been a senior executive at H2O since Crastes hired him in 2016.

And then there is the role of Natixis, the large French bank that was majority owner of the asset manager when the scandal occurred. In the wake of the FT’s reporting, Natixis claimed the Windhorst-linked investments were “quite diversified” and dismissed conflict of interest claims as “groundless”. It still owns a quarter of the business and has suffered little obvious fallout.

There is a large financial question mark hanging over H2O, too. A group of 9,000 aggrieved investors are pursuing a class action law suit, seeking more than €800mn. The extent of H2O’s financial reserves, or its capacity to fund further investor compensation, is unclear. It is understood to have described the €250mn settlement pot as the maximum it could afford if it was to maintain going concern status with its auditors.

Of the nearly €10bn of funds frozen in 2020 when the AMF intervened, more than 90 per cent would have been returned to investors after factoring in the new compensation scheme, according to people close to H2O — a calculation disputed by investors who are suing the group.

Meanwhile the group’s assets under management are understood to have shrunk to a little over €6bn. Guilloux’s hopes of reviving the franchise rest on its investment record, particularly its €1.4bn Multibonds macro fund, which has performed well in the period since the Windhorst-related losses, averaging nearly 20 per cent a year.

Financial scandals happen. Regulators must sometimes show pragmatism as well as toughness. But for the FCA to play legal mediator, rather than policeman in this case, looks odd and risks undermining all-important regulatory deterrence. Odder still is H2O’s belief that it can truly move on and rebuild the trust of stakeholders when personnel directly connected to the affair remain in senior roles.

Chinese developer Kaisa reaches restructuring agreement

Company to issue $5bn of bonds and $4.8bn of convertible bonds

Chinese developer Kaisa said it had reached a restructuring agreement with a key creditor group on Tuesday, as it seeks to stave off legal challenges that could see it liquidated in Hong Kong.

The company said in a stock exchange filing that it would issue $5bn of bonds as part of the proposed restructuring. Investors would also receive $4.8bn of convertible bonds.

Kaisa’s plan comes after it defaulted in 2021, part of a wider reversal of fortune for many developers that profited from China’s property boom before the sector collapsed three years ago.

The company was the biggest borrower of offshore debt behind Evergrande, the developer at the heart of a property cash crunch that led to a spate of other defaults and continues to weigh on the world’s second-largest economy.

Brock Silvers, chief investment officer of Hong Kong private equity group Kaiyuan Capital, said while the plan was only a proposed agreement with a subset of creditors, it “still points toward real progress” and made a September liquidation order “unlikely”.

Silvers added: “This would be a positive step for China’s troubled dollar bond market.”

More than 20 Chinese property developers have faced or are facing winding up petitions in Hong Kong courts, where many of them listed and issued bonds. Offshore Chinese property debt made up a large portion of Asia’s high-yield bond market but new issuance has dried up since the slowdown began.

Kaisa’s case, the next hearing for which takes place on September 9, has been repeatedly adjourned over recent months and a judge in June warned over delays.

Evergrande’s Hong Kong entity was ordered to liquidate earlier this year by a court in the territory after failing to produce a concrete restructuring plan despite repeated adjournments. But almost all of its assets are in the mainland, which operates under a different legal regime.

A China-based restructuring specialist said a successful offshore restructuring agreement for developers could help prevent an eventual liquidation scenario in Hong Kong, as it would not be “realistic” for offshore creditors to recover a significant amount from the process.

Kaisa became the first Chinese developer to default offshore in 2015, but recovered after restructuring before defaulting again years later. The litigant in its case this time is Citi bank, the trustee bank on its defaulted offshore bonds.

Sunac, another Chinese developer, successfully restructured its offshore debts late last year. Others, such as Country Garden, have yet to reach any agreement.

China’s property slowdown has raised questions over the sector’s role in future growth as previously booming urbanisation slows. Fitch Ratings, the rating agency, said on Tuesday it expected housing demand in China to fall 20 per cent to 800 square metres per year from 2024-40, compared with demand in the decade to 2020.

Tie-up between Canadian group and Japan’s Seven & i would create one of America’s largest retail chains

US antitrust regulators are likely to challenge any proposal by Canadian retailer Alimentation Couche-Tard to combine with the Japanese operator of 7-Eleven, two people briefed on the matter said, over concerns a deal would increase prices for consumers and damage the labour market.

A tie-up between Couche-Tard, which operates the Circle K brand, and Japan’s Seven & i, which controls the world’s biggest convenience store chain, would create one of America’s largest retail chains.

The deal, which would be the biggest takeover of a Japanese company ever attempted by a foreign buyer, was also likely to draw scrutiny in Tokyo under the Foreign Exchange and Foreign Trade Act, said two M&A lawyers in Japan.

US regulators have yet to examine the details of any proposal as the two companies have not reached an agreement but people close to them said the deal was expected to come under scrutiny over its potential impact on shoppers.

“It’s still early to make an assessment as we don’t have an agreed deal but you can expect this deal to get challenged,” said a person close to top US regulators.

Another person said that if the two companies were to agree a deal they would have to offer significant remedies or divestitures to get US regulators’ approval.

A third person said a merger between Seven & i and Couche-Tard would be treated similarly to the $24.6bn deal between US supermarket giants Kroger and Albertsons. The Federal Trade Commission has sued to block the supermarket deal, alleging it would eliminate competition between the two companies, increase prices for groceries and harm product quality and consumer choice. On Monday Kroger sued the FTC to unblock the deal.

7-Eleven operates more than 12,500 convenience stores in the US, while Couche-Tard has more than 7,000 retail stores, according to data from food consultancy group Technomic. 

Combined, they would control nearly 20,000 stores across most US states, which would be nearly 10 times more than the next biggest player, Casey’s, and employ more than 200,000 people.

Antitrust regulators in the US have been aggressive during the Biden administration, challenging deals in court as well as in public opinion, leading many companies to walk away from transactions for fear of being blocked.

Bankers close to Seven & i said they thought the feasibility of a takeover was low and cited scrutiny by both US regulators and potentially the Japanese government if the foreign takeover became politicised. Convenience stores in Japan are widely regarded as critical infrastructure in the event of an earthquake.

However, lawyers who have worked on large cross-border deals said antitrust objections from US regulators could be overcome by selling some stores. Couche-Tard might be able to satisfy the FTC through the sale of between 750 and 1,000 stores, said analysts at two funds.

Lina Khan, chair of the FTC, and Jonathan Kanter, head of antitrust at the Department of Justice, have applied a more expansive approach to competition rules by focusing beyond the pricing of goods and services on all aspects of market power.

A combination of Couche-Tard and Seven & i would risk raising the prices of beverages and food items as well as limiting the choice of jobs and employers in certain markets where the two companies compete directly with one another, said people close to the regulators.

Although many on Wall Street hope that antitrust enforcement will be eased under a new Harris or Trump administration, both US presidential candidates are expected to give a clear mandate to regulators that any deals that increase inflation or cut jobs should be blocked.

Seven & i agreed to acquire the Speedway petrol stations business for $21bn in 2020, giving the Japanese company an even bigger footprint in the US.

Couche-Tard announced on Monday that it had expanded its network by buying 270 convenience stores and petrol stations across five US states, including Indiana, Pennsylvania and Ohio from supermarket chain Giant Eagle.

Disaster off Sicily with Mike Lynch on board raises concerns over marine safety in era of extreme weather events

One of the world’s largest sailing superyachts sank in high winds off Sicily on Monday, with UK tech entrepreneur Mike Lynch among those missing.

Camper & Nicholsons, which managed the 56-metre British-flagged Bayesian yacht, said it “encountered severe weather and subsequently sank” near Palermo.

Owned by the Lynch family, the boat had 10 crew and 12 guests on board, 15 of whom have been rescued, including Lynch’s wife, Angela Bacares. The chef’s body was found near the wreckage, while six other people — including Lynch and his 18-year old daughter — are still missing.

The rapid sinking of such a large, modern and well-equipped yacht due to bad weather, rather than as a result of a collision, raises concerns over marine safety as extreme weather events occur with more frequency and intensity.

Why did the superyacht sink?

The yacht is likely to have been caught in a waterspout, a form of tornado, with Italian coastguards describing the wind as very strong. While bad weather was forecast, it was not expected to be so severe. They also said Bayesian was anchored when it was struck by the wind. 

Karsten Borner, the skipper of a nearby boat, was quoted by Reuters as saying he was using his motor to maintain control of his own vessel and to avoid a collision with Bayesian when the weather hit. Bayesian “went flat [with the mast] on the water, and then went down”, he said.

His comment suggests that it was the combination of high winds and Bayesian’s 72-metre mast — the world’s tallest aluminium mast, according to manufacturers Perini Navi — that triggered the disaster.

Even with no sails up, a boat with a tall mast has a lot of “windage”, or surface area exposed to the wind, that can tip the vessel over in a storm. The boat may have heeled over so far that it took on water through open windows, hatches or companionways.

According to Perini Navi, Bayesian had a so-called lifting keel, a system for reducing the depth of the keel — otherwise nearly 10m — for easier entrance to shallow harbours. If the keel were for some reason in the raised position rather than fully extended, that would compromise the boat’s stability in a strong wind. 

Skippers of sailing yachts with exceptionally high masts typically aim to move out of harm’s way if strong winds are forecast.

Should we blame climate change?

Climate change is likely to have been at least a contributing factor in the Mediterranean’s unsettled and sometimes violent weather this summer. The Mediterranean is a favoured cruising ground for superyachts during the northern hemisphere summer — in winter, the wealthy prefer the Caribbean or the Indian Ocean — because the weather is typically warm and sunny, and storms are rare. 

Meteorological experts have long predicted that climate change and the heating-up of oceans will help trigger more extreme weather events, including floods, droughts and more severe hurricanes.

Last Thursday, the Mediterranean reached a median temperature of 28.9C — its highest surface temperature on record — and similar records are being broken in other seas. June was the 15th consecutive month that global sea temperatures hit a record high and forecasters predict the warmer waters may fuel an intense Atlantic hurricane season.

Will disasters at sea occur more often?

While design improvements and safety regulations have made even the smallest boats more safe, the potential dangers posed by bad weather are increasing in line with the rising number of pleasure vessels at sea.

Last week, a sudden and exceptionally strong thunderstorm with wind squalls blowing at up to 53 knots, or about 100km/h, swept over the Balearic Islands of Ibiza and Formentera, driving several sailing and motor yachts to crash on to the shore. Among those damaged and grounded but later recovered was a luxury, 30-metre vessel made by the Monaco-based Wally Yachts.

The cause was a thunderstorm known as a “Dana”, a Spanish acronym for depresión aislada en niveles altos or isolated high-altitude depression. The bad weather also caused serious flooding in Mallorca and Menorca to the north.

How can boat makers and skippers help avoid more deaths?

The weather in the Mediterranean is often notoriously unpredictable and prone to sudden, unforecast gales — unlike the north Atlantic, where weather shifts are usually signalled days in advance by changing air pressure and cloud formations visible to the naked eye.

Safety at sea depends largely on two factors: the seaworthiness of the boat, and the skill and experience of the captain and crew. 

Modern boats — Bayesian was built in 2008 and refurbished four years ago — are normally built to high safety standards and equipped with electronic navigation and communications systems, as well as standard emergency gear such as life vests. Common accidents include people falling overboard, fires on board and accidental groundings or collisions — not sinking in bad weather.

In the words of one Italian coastguard officer, Bayesian’s holidaymakers and crew were just “in the wrong place at the wrong time”.