US Markets
Monday, July 8th, 2024 4:56 pm EDT
Key Points
- Paramount Global has agreed to merge with Skydance, marking the end of the Redstone family’s control over the company. The deal involves private equity firms RedBird Capital Partners and KKR investing over $8 billion into Paramount and acquiring National Amusements, valuing it at $2.4 billion.
- The merger is expected to close in the third quarter of 2025, subject to regulatory approval, and includes a 45-day “go-shop period” for other offers. The merger will result in significant changes in Paramount’s leadership, with Skydance founder David Ellison as CEO and Jeff Shell as president.
- Paramount’s business has faced challenges such as a weak advertising market, declining cable TV customers, and debt of nearly $15 billion. Despite these issues, the merger aims to leverage synergies between Skydance and Paramount to focus on content, sports, and extracting value from traditional TV while exploring opportunities for restructuring, cost-cutting, and asset sales.
Paramount Global has reached a merger agreement with Skydance, concluding months of negotiations. This deal signifies the Redstone family’s departure from the storied movie studio and media company. Paramount’s special committee approved the merger after Shari Redstone’s National Amusements, Paramount’s controlling shareholder, reached a preliminary agreement with Skydance. Previously, a similar deal had fallen through. The new agreement involves private equity firms RedBird Capital Partners and KKR investing over $8 billion into Paramount and acquiring National Amusements, valuing it at $2.4 billion. Paramount’s class A shareholders will receive $23 per share in cash or stock, and class B shareholders will receive $15 per share, amounting to $4.5 billion in total for public shareholders. Skydance will also inject $1.5 billion into Paramount’s balance sheet.
Jeff Shell of RedBird highlighted the transformative nature of the merger, while Skydance founder David Ellison will become CEO of the combined company, with Shell as president. The merger, pending regulatory approval, is expected to close in Q3 2025 and includes a 45-day “go-shop period” for other offers. This merger marks a significant change in Paramount’s ownership and a broader shift in Hollywood. The Redstone family, which long controlled Paramount, CBS, MTV, and Nickelodeon, will cede control to Ellison, son of Oracle founder Larry Ellison.
Paramount has faced challenges, including a weak advertising market and declining cable TV customers, while its streaming platform, Paramount+, has yet to become profitable. Despite this, Paramount stock dropped 3% following the announcement. The merger ends the Redstones’ decades-long control of CBS and Viacom. Shari Redstone emphasized her father’s belief in the importance of content in media. Executives from RedBird and Skydance noted the synergies between the companies and their vision for Paramount’s future, focusing on films, CBS, sports, and optimizing the traditional TV business.
Paramount’s lengthy sale process began last year, with potential buyers like Warner Bros. Discovery. Burdened with nearly $15 billion in debt, the economics of a deal were complex. Paramount’s special committee, formed in January, explored various strategic options. In June, the parties reached a preliminary deal, which Redstone halted shortly after. Paramount’s interim leadership then aimed to restructure by cutting debt and seeking a streaming partner. They assured employees that it would be “business as usual” until the deal closes, including planned layoffs and cost cuts.
The Skydance consortium supports these strategies and included cost-cutting in their business model. They are open to selling some assets if the price is right, with potential buyers showing varied interest recently. Media mogul Barry Diller and former media executive Edgar Bronfman Jr. have expressed interest, while Sony Pictures and Apollo Global Management also considered acquisitions. The deal allows 45 days for other offers, with a $400 million breakup fee if Paramount opts for another bid. Post-merger, Skydance will own Paramount’s class A shares and 69% of class B shares. The merger values Skydance at $4.75 billion, with its equity holders receiving 317 million in class B shares at $15 per share.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/08/paramount-skydance-merger.html
