Skydance Media and Paramount Global (PARA.O) have signed a new deal and agreed to merge, the companies announced late on Sunday, marking a new chapter for one of Hollywood’s oldest studios.
The two companies agreed to a two-stage process in which Skydance and its deal partners would acquire National Amusements, the company in which the Redstone family holds a controlling stake in Paramount, for $2.4 billion in cash.
Skydance would then merge with Paramount, offering shareholders $4.5 billion in cash and stock and bringing an additional $1.5 billion to Paramount’s balance sheet.
The deal marks the end of an era for Shari Redstone, whose late father, Sumner Redstone, transformed a family-run drive-in movie theater chain into a media empire that included Paramount Pictures, the CBS broadcast network and the cable television networks Comedy Central, Nickelodeon and MTV.
“As the industry evolves, I want to strengthen Paramount for the future while ensuring that content remains king,” Redstone, chairman of Paramount and National Amusements, said in a statement, quoting a phrase coined by his father.
The merger will combine Paramount, which has produced classic films such as “Chinatown,” “The Godfather” and “Breakfast at Tiffany’s,” with the financing partner behind several recent blockbusters including “Top Gun: Maverick,” “Mission: Impossible – Dead Reckoning” and “Star Trek Into Darkness.”
David Ellison, the 41-year-old tech heir who founded Skydance, will become chairman and CEO of the new Paramount.
Former NBCUniversal CEO Jeff Shell will become the new president.
Paramount’s Pain
Ellison, Son of the Oracle (ORCL.N), open a new tab Co-founder Larry Ellison will inherit a media company with a mountain of challenges, as it navigates an entertainment business upended by the streaming-video revolution.
Paramount has lost about $17 billion in value since late 2019 as its traditional TV business has declined faster than its Paramount+ streaming service has made money.
Tensions have been rising among management: Chief Executive Bob Bakish was fired in April after clashing with Redstone over the Skydance deal.
He has been replaced by three executives occupying the “Office of the CEO,” a group that has proposed cutting $500 million, selling certain assets and seeking a joint venture partner for Paramount+.
Ellison has pledged to strengthen Paramount’s traditional television networks while also bringing “best-in-class” technology and modern infrastructure to Paramount+ and its free streaming service, Pluto TV.
“We are committed to revitalizing Paramount’s business and strengthening it with new technology, new leadership and creative discipline aimed at enriching generations to come,” Skydance said in a statement announcing the deal.
The Paramount-Skydance deal came after months of negotiations, but the talks appeared to have stalled when Redstone abruptly walked away from them on June 11.
At the time, Skydance and its partners had agreed to acquire National Amusements, which owned 77% of Paramount’s voting stock.
But talks stalled on other issues, including National Amusements’ demand for approval by a majority of shareholders other than Redstone, which Skydance viewed as impossible to achieve.
Other potential bidders for National Amusements that have emerged include independent Hollywood producer Steven Paul, Seagram heir Edgar Bronfman, who is backed by private equity firm Bain Capital, and IAC (IAC.O) Chairman Barry Diller.
Sony Pictures (6758.T) and buyout firm Apollo Global Management (APO.N) had previously expressed interest, but no deal came to fruition.
Meanwhile, talks between Messrs. Ellison and Redstone have quietly resumed and have become more constructive, two people familiar with the discussions said.
A New Covenant
Skydance has increased its payment to the Redstone family for the sale of National Amusements to $1.75 billion, according to a source familiar with the terms of the deal.
It also strengthened legal protections against potential shareholder lawsuits, paving the way for a new agreement, the people said.
Under the terms of the agreement, Ellison’s Skydance will merge with Paramount in an all-stock transaction that will value Skydance at $4.75 billion, creating a company with an enterprise value of $28 billion.
Ellison and his financial backers, the Ellison family and Redbird Capital Partners, plan to pay Paramount’s non-voting Class B shareholders $15 per share in cash or stock as of July 1, representing a 48 percent premium.
Holders of Class A voting stock will receive $23 per share as of July 1, or a 28% premium, in cash or stock.
Upon closing of the transaction, the Skydance investor group will own 100% of the new Paramount’s Class A voting shares and 69% of the outstanding B shares.
The deal also gives Paramount 45 days to find a better offer, potentially opening the door for further developments in an already turbulent contracting process.
