In a shocking turn of events, National Amusements has decided to cease talks with Skydance regarding a proposed merger with Paramount Global. CNBC’s David Faber was the first to report this development on Tuesday. This decision comes after National Amusements, owned by Shari Redstone, who is the controlling shareholder of Paramount, had previously agreed to the terms of a merger with a consortium consisting of David Ellison’s Skydance, along with private equity firms RedBird Capital and KKR. The deal was in its final stages, awaiting approval from Redstone herself, as reported by CNBC. The sudden halt in talks has had a significant impact on Paramount’s stock, with shares closing nearly 8% lower after the news broke. Paramount has yet to release an official statement on the matter, and representatives from National Amusements, Skydance, and Redbird have not responded to requests for comments.
The past few months have been a roller coaster ride for Paramount and its potential merger with Skydance. The abrupt change in direction not only comes shortly after Skydance and Paramount had reached an agreement on merger terms but also after Paramount’s annual shareholder meeting where the company’s leadership had outlined ambitious plans for the future. The current leadership of Paramount, known as the “Office of the CEO,” which includes George Cheeks, Chris McCarthy, and Brian Robbins, presented a strategic roadmap in case the company was not sold. This shared leadership structure was implemented when former CEO Bob Bakish stepped down in April. The trio’s plan focused on exploring streaming joint venture opportunities, cost-cutting measures of $500 million, and divesting non-core assets. Redstone had supported this alternative option if she chose not to go forward with the sale. She had control over Paramount’s fate and the decision on whether to sell the company.
In addition to Skydance, there were other players interested in acquiring Paramount. Apollo Global Management and Sony had expressed interest in purchasing the company for $26 billion, with plans to break up Paramount, separating its movie studio from other divisions. However, Redstone’s preference was to keep the company intact, leading her to favor a deal that would maintain Paramount’s structure. The talks with Skydance and the subsequent agreement on merger terms were seen as a step in the right direction. The proposed deal would have seen Skydance acquiring nearly 50% of class B Paramount shares at $15 each, amounting to $4.5 billion. This would have been part of an $8 billion deal, with Redstone receiving $2 billion for National Amusements. Skydance and Redbird were also expected to inject $1.5 billion in cash to aid in reducing Paramount’s debt.
The plan put forth by Paramount’s leadership team underlined the importance of reducing debt and restoring the company to an investment-grade rating, following a downgrade earlier in the year. Paramount’s long-term debt stood at approximately $14.6 billion as of March 31, making it imperative for the company to take measures to improve its financial standing. The swift change in course regarding the merger talks has left stakeholders and industry experts speculating on Paramount’s next moves and the potential impact on its operations and future growth strategies.