It was reported by CNBC’s David Faber that Paramount and Skydance have come to terms on a merger deal. This deal is said to be announced in the near future, pending approval. The agreement stems from negotiations between a special committee at Paramount and a buying consortium led by David Ellison’s Skydance, along with backing from RedBird Capital and KKR. The key player needing to sign off on the deal is Shari Redstone, the controlling shareholder of Paramount, who holds the majority of class A shares in the company.
According to Faber’s report, the terms of the agreement involve Redstone receiving $2 billion for National Amusements, while Skydance plans to purchase almost half of the class B shares in Paramount for $15 each, totaling $4.5 billion. This would result in the holders of class B shares having equity in the new merged company. Additionally, Skydance and RedBird would inject $1.5 billion in cash into Paramount to help reduce its debt. Post-merger, Skydance and RedBird would hold a majority stake of two-thirds in Paramount, leaving the remaining third for the class B shareholders.
The negotiation process for this deal has been tumultuous, with a recent competing offer from Apollo Global Management and Sony Pictures. However, the terms of this agreement do not require a vote from the shareholders, which was a major point of contention in the negotiations. The deal is set to be valued at $8 billion, which is a significant increase from the initial $5 billion offer that was on the table. Under the original terms, Redstone would have received less than $2 billion for her stake, and the class B shareholders would have been bought out at a 30% premium price of $11 per share.
Leadership Changes
Apart from the complexities of the merger deal, Paramount has also seen changes in its executive positions in recent months. With the departure of Bob Bakish as CEO in April, the company now operates with what they call the “Office of the CEO,” comprised of George Cheeks, Chris McCarthy, and Brian Robbins. These executives plan to outline the strategic priorities for Paramount at the upcoming annual shareholder meeting. The board will convene after the meeting to further discuss the direction of the company under the current leadership.
Future Outlook
Despite the interest from Apollo and Sony in acquiring Paramount for a larger sum, Redstone seems to be in favor of a deal that keeps the company intact. This is in contrast to the potential plan from Apollo and Sony to break up the company post-acquisition. It will be interesting to see how the merger deal between Paramount and Skydance plays out in the coming days and what implications it may have on the future of the entertainment industry.
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