In a stunning reversal, David Ellison‘s Skydance Media and Paramount Global controlling shareholder Shari Redstone have returned to the M&A altar.
The companies have reached terms on a revised merger agreement for Redstone’s National Amusements Inc. just three weeks after Redstone abruptly pulled out of a planned combination, multiple people familiar with the talks told Deadline. NAI controls almost 80% of voting shares in Paramount.
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A special committee of Paramount’s board of directors, which was formed to evaluate strategic options for the troubled media company, is currently reviewing the updated deal terms, according to sources. The Wall Street Journal earlier Tuesday reported on the revived discussions.
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Reps from Paramount, Skydance and NAI declined comment.
The proposal currently being considered would see Skydance pay $1.75 billion for NAI. That’s less than what the parties had previously agreed to for the first step in a two-step transaction bringing NAI under Skydance ahead of a full merger with Paramount. But the figure is actually about $50 million more as a net payout to Redstone than the prior deal, adjusting for debt repayment. A “majority of the minority” vote requirement, seen by Ellison as a non-starter in prior rounds of talks, has been dropped in the current proposal, and Redstone is gaining more protection from shareholder lawsuits. Safeguarding from legal jeopardy, aka indemnification, had been a major sticking point between the parties in the past.
The WSJ reported that Skydance and National Amusements also have agreed to a 45-day “go-shop period,” during which other interested Paramount bidders can make offers. Skydance has been pursuing a deal for more than six months. In more recent weeks, investment groups led by Edgar Bronfman, Barry Diller and producer Steven Paul have emerged as interested parties. Private equity giant Apollo, Sony Pictures and Byron Allen have also been linked with bids.
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The reconciliation between Paramount and Skydance only adds to what has become one of the messiest and most erratic M&A processes in recent Hollywood history. Paramount, which was formed from the merger of CBS and Viacom in late 2019, has struggled mightily amid the decline of linear TV and the headlong rush into streaming, not to mention the adverse operating environment created by Covid and the 2023 strikes. With a stock price nearly one-third of its level at the time of the merger close and $14.6 billion in long-term debt at the end of 2023, Paramount has developed an intensifying need for a transaction.
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After Redstone withdrew from the prior Skydance arrangement at the last possible moment, her attention and that of Paramount overall shifted to the company’s updated strategic plan. A three-member Office of the CEO, consisting of internal executives promoted to the role after the ouster of Bob Bakish last April, laid out their plans at the company’s annual shareholder meeting last month. A town hall with employees last week also included further messaging from the co-CEOs — George Cheeks, Brian Robbins and Chris McCarthy — who have promised to achieve $500 million in annual cost savings and also sell off select assets and improve streaming margins via a joint venture or partnership. A new round of layoffs is also expected to start later this summer and key senior executives including the heads of Legal and Home Entertainment have also left the company.
While the Skydance news has delivered another jolt to an already rattled workforce, the interesting reality is that Paramount has fared pretty well across its film, TV and streaming efforts in recent weeks despite the noise. Last weekend, Paramount Pictures opened A Quiet Place: Day One to nearly $100 million worldwide, the best start for any installment in the franchise, as the studio extended a 2024 win streak stretching back to Mean Girls and Bob Marley: One Love. Comedy Central’s The Daily Show saw its highest-rated telecast of the year with 18- to 34-year-olds on the night of the first presidential debate with a live Jon Stewart-hosted episode. Showtime Studios has made some major talent deals, with Jeffrey Wright, Michael Fassbender, Patrick Dempsey and Richard Gere recently joining the fold. CBS News continued to invest in its national streaming service, launching CBS News 24/7 on June 24. The new daily flagship series presents the day’s biggest stories in a manner intended to be both live and immersive, the news division says.
Whether the momentum can last, however, is anyone’s guess. The prospect of M&A, rather than a strategic turnaround, has buoyed the outlook of some Wall Street analysts, but there is plenty of bearish sentiment weighing down the stock. In a note to clients Tuesday morning, before news broke about the rebooted Skydance talks or revived negotiations for a potential sale of BET Media, Loop Capital analyst Alan Gould described it as dragging out the inevitable. He has a “sell” rating on Paramount, with a 12-month price target of $8.
“The longer it takes for a deal to be done, the less the assets will likely be worth,” he wrote. “There will undoubtedly be more Paramount scuttlebutt at the upcoming Sun Valley conference.”
The seven months of “ad nauseum” talk of Skydance and Paramount coming together, argued Barclays Capital analyst Kannan Venkateshwar, isn’t necessarily a net positive. “The fact that this is still the only serious deal on the table even today says a lot about Paramount’s strategic choices,” he wrote in a client note.