Last fall, David Ellison’s Skydance made a significant move to acquire Paramount, creating speculation on how and when Shari Redstone would finalize the deal. Paramount, a studio long partnered with Skydance, was seen as a valuable asset by Ellison, who appreciated its prestigious backlot and intended to maintain its operations. Ellison’s proposal included a substantial cash offer for Redstone’s stake in National Amusements (NAI).
Throughout extensive discussions, Warner Bros. Discovery and Byron Allen, another potential buyer who had made a formal offer, faded from the picture. Paramount and Skydance entered a period of exclusive negotiations in April. However, the month concluded without a deal, leading to increasing uncertainty. Sony then expressed interest, but intense discussions between Paramount and Skydance continued until just last weekend.
In the end, Shari Redstone, whose family’s holding company NAI controls about 80% of Paramount, had the final say. On Monday, National Amusements announced that the two parties failed to reach “mutually acceptable terms,” causing Paramount’s stock to dip.
The collapse of the deal can be attributed to various factors depending on the perspective. According to sources, while the economic terms were largely agreed upon, disagreements arose over other critical issues. One contentious point was the requirement for a “majority of the minority” of shareholders (excluding Redstone) to consent to the deal. Redstone supported this provision, but Ellison opposed it, likely anticipating a rejection from these shareholders.
Additionally, there were concerns about Skydance’s financials and its valuation, which was deemed high by some at Paramount. The proposed deal involved Skydance paying $2.25 billion upfront for NAI and merging with Paramount in a transaction valuing Skydance at $4.75 billion. There was also a lack of consensus on how Skydance would manage the company through the regulatory approval process.
Speculation surrounds Redstone’s motivations, ranging from reluctance to cede her role as a media mogul, to dissatisfaction with Ellison or the terms offered for her stake. Despite initial alignment between the two parties, no formal slate financing agreement for Skydance exists on Paramount’s Melrose lot, even though Skydance had options to co-finance major IP like the “Mission: Impossible,” “Top Gun,” and “Star Trek” franchises.
Moving forward, Redstone may prefer simpler deals that buy out her stake without merging the company. Edgar Bronfman Jr., backed by Bain Capital, and producer Steven Paul, with wealthy partners, are exploring potential offers. Alternatively, Redstone might focus on reducing debt, enhancing Paramount’s value, and possibly attempting a sale in the future under the guidance of the new CEO team of Brian Robbins, George Cheeks, and Chris McCarthy. These executives are expected to pursue strategies to divest non-core assets, unlock content value, and seek a joint venture partner for Paramount+.
At the recent shareholders meeting, Robbins, Cheeks, and McCarthy outlined plans to streamline operations, divest from assets like BET and Showtime, and explore partnerships for Paramount+. Although having three CEOs is unusual, they are experienced leaders whom Redstone seems intent on retaining.
While Sony is still reviewing Paramount’s financials, regulatory issues regarding a Japanese company acquiring a U.S. broadcast entity pose significant challenges, making a deal seem unlikely.
Inside Paramount, there was relief at the failed merger, as Skydance’s takeover would have led to major leadership changes, with Jeff Shell poised to lead the merged entity under Ellison, potentially displacing current executives. However, investor reaction was negative, with Paramount’s stock falling about 8% by the close of trading and another 1% after hours. Despite reservations about the Ellison deal, investors remain uncertain about Paramount’s future trajectory.
Analyst Robert Fishman of MoffettNathanson highlighted the complexity of Paramount’s asset mix, noting that any future plan or buyer will need to navigate the evolving media landscape with these challenges in mind.
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