Paramount-Skydance Deal Would Give Shari Redstone’s Firm Over $2 Billion in Cash
Nonvoting shareholders would receive stock in merged entertainment company under terms being discussed and weighed by a special board committee
A sale of Paramount Global PARA -3.23%decrease; red down pointing triangle could work out very differently for controlling shareholder Shari Redstone and the rest of the entertainment giant’s investors.
Redstone’s National Amusements, which controls Paramount through a large voting stake and also owns a movie theater chain, is engaged in exclusive talks to sell itself to Skydance Media, The Wall Street Journal reported this week.
Under the terms being discussed, Redstone’s firm would receive over $2 billion in cash in the first step of the transaction, people familiar with the situation said. Then Paramount Global, owner of broadcaster CBS, cable brands like Nickelodeon and MTV and the Paramount film studio, would acquire Skydance in an all-stock deal valued at around $5 billion.
The bottom line: Redstone would get cash while investors with nonvoting shares would get stock in the combined company and wind up with a diluted shareholding.
Separately, Skydance could provide a substantial cash infusion to Paramount to bolster its balance sheet and help pay down debt, the people said.
A deal would require approval from a special committee of Paramount’s board, which has the responsibility of finding the best possible deal for all of the entertainment company’s shareholders. The company has been open to a deal for some time, but the rapid erosion of the cable TV business and difficulty of making money on streaming has complicated the sales pitch.
Paramount and Skydance are in exclusive merger talks for 30 days. Days before that period commenced, private-equity giant Apollo Global Management APO 3.23%increase; green up pointing triangle submitted an offer for Paramount valued at $26 billion, including assumption of debt, the Journal reported. It is possible that the emergence of Apollo’s interest could affect the Skydance negotiations.
Paramount’s special committee didn’t engage with Apollo, on advice of its bank, Centerview Partners, according to the people familiar with the situation.
Paramount has a market capitalization of $8.6 billion and $14.6 billion in debt. Skydance was valued at more than $4 billion in a 2022 funding round.
Redstone buys into the vision for the Skydance deal put forward by its CEO, David Ellison. With the backing of his father, Oracle co-founder Larry Ellison, he has laid out a plan to grow Paramount by investing in technology, moving aspects of the business to the cloud and putting more resources behind its studio.
Skydance has also explored a joint venture between Paramount+ and another streaming service, which could substantially cut costs. The Journal reported in February that Paramount had talks with Comcast’s Peacock about potential streaming partnerships, including a joint venture.
Skydance has partnered with Paramount on Tom Cruise’s “Top Gun: Maverick” and “Mission: Impossible—Dead Reckoning Part One,” as well as “Transformers: Rise of the Beasts” and additional “Mission Impossible” and “Top Gun” movies that are in the works. By merging the two companies, the combined entity would have much more flexibility around what it could do with those franchises, said another person familiar with the situation.
One of the reasons that Paramount directors opted to not move forward on Apollo’s offer was because Apollo hadn’t yet done “diligence”—a process to stress-test the financials and potential risks in a deal. The board didn’t want to risk losing the bid in hand from Skydance, said some of the people. Also, there were concerns that Apollo, which has a majority interest in Cox TV stations, would run into antitrust hurdles in acquiring Paramount, which also owns many TV stations.
Redstone has expressed wariness to associates about selling the company to a private-equity firm. Paramount also had concerns about Apollo’s financing. Apollo took a different approach with an earlier bid, when it offered $11 billion just for Paramount’s studio.
People close to the Apollo bid said the private-equity firm wouldn’t need additional debt financing to buy Paramount because its existing capital structure could be rolled into a new deal.
Redstone took control of National Amusements, her family’s media empire, five years ago and united its two wings, CBS and Viacom, through a merger in 2019, later rebranding the resulting company Paramount Global.
Over the years Redstone has fielded offers for parts of Paramount, especially its storied Hollywood studio, but has resisted breaking the company up. Another prized asset is broadcaster CBS, which has valuable NFL TV rights. National Amusements owns nearly 80% of the voting shares of Paramount.
The merger discussions come as Paramount has been struggling to make its streaming service, Paramount+, profitable. The company’s deal with Charter Communications for carriage of its cable channels is up this spring, while its deal with Comcast is up at the end of the year. Other parties have expressed interest in Paramount in recent months, including Warner Bros. Discovery and media executive Byron Allen.