Nearly a year after brokering a merger with Skydance Media and seemingly putting itself on a clear path forward, Paramount Global stands on shakier ground than ever as the $8 billion deal still hasn’t closed.
In the way is the Federal Communications Commission’s required approval of the deal’s transfer of broadcast licenses. Observers believe the agency’s review is being held up by President Donald Trump’s $20 billion lawsuit against Paramount’s CBS and its flagship “60 Minutes” program.
But a resolution may soon be coming. On Monday, Trump’s attorneys filed a motion with the Texas federal court on behalf of both sides, requesting that a stay on all proceedings be granted until Thursday. They noted that both sides are “engaged in good faith, advanced, settlement negotiations,” suggesting a resolution could be reached soon. This comes as shareholders are set to meet on Wednesday to vote on whether to elect three new board directors who could help green light a potential settlement.
Paramount is walking a fine line when dealing with Trump. If the company doesn’t settle, experts believe it could risk the Skydance merger’s collapse, leaving the media giant with difficult decisions to make as it looks to accelerate streaming profitability while managing the declining linear business. There’s also the matter of roughly $400 million that controlling shareholder Shari Redstone’s holding company National Amusements (which controls Paramount) owes to the Ellison family and its financial advisor BDT/MSD Partners to make debt payments, an individual familiar with the matter told TheWrap.
On the other hand, the company’s been under pressure not to settle from angry staffers within CBS, as well as federal and California State Senate lawmakers, who have warned reaching a deal in exchange for regulatory approval could constitute a violation of federal anti-bribery laws. Also complicating the deal are some Paramount shareholders, who are suing or have threatened to after alleging the Skydance deal prioritizes Redstone over the rest of the investor base.
“If this deal doesn’t get done, [Shari Redstone’s] got a world of trouble. And depending on who you talk to, she may be in for a world of trouble if this does get done,” one cable industry veteran who wished to remain anonymous told TheWrap. “She’s between a rock and a hard place.”
Representatives for National Amusements, Paramount and Skydance declined to comment for this story. Representatives for BDT/MSD Partners, the FCC and Trump did not return TheWrap’s request for comment.
Trump vs. CBS
Despite Trump’s recent praise of Skydance Media CEO David Ellison’s pending takeover, many observers believe a settlement of his $20 billion lawsuit against CBS and “60 Minutes” over the editing of an Oct. 7 interview with former Vice President Kamala Harris is the final answer to securing regulatory approval.
A mediator in the litigation proposed a $20 million settlement, per the Wall Street Journal, which would include a $17 million donation to Trump’s presidential foundation or museum, as well as millions in legal fees and public service announcements on Paramount-owned networks to fight antisemitism.
Opponents of a potential settlement, from lawmakers and legal experts to employees within Paramount and CBS itself, have argued that the lawsuit is frivolous and has no merit. But Corey Martin, managing partner of Granderson Des Rochers LLP’s entertainment finance practice, told TheWrap that a case like this would never go to trial and typically gets resolved due to the exorbitant costs of high-stakes commercial litigation.
“That sum will continue to accrue expeditiously the longer this case continues,” he said. “From my perspective, at a $20 million sum, settlement should be a no-brainer business decision for CBS.”
But it remains to be seen whether that’s a price Paramount’s board will be willing to pay and Trump will be content with. The Journal previously reported that Trump shot down Paramount’s offer to settle the lawsuit for $15 million, with him aiming to get at least $25 million and an apology.
Martin believes Trump would be willing to accept the settlement proposed by the mediator, noting he appears to be “less motivated by money and more motivated by what he and his supporters believe is a liberal bias in the mainstream media.” He also said Trump may be willing to drop the apology, but would likely declare victory upon settlement and assert that CBS’ willingness to settle is an admission of wrongdoing.
While acknowledging there would be internal dissatisfaction within the network and “60 Minutes” if they agree to it, Martin said it’s “no reason” not to settle.
Paramount looks to expand board
As the advanced settlement negotiations continue, Paramount’s board is poised to expand from five to seven members following a vote at its annual shareholder meeting, with Boies Schiller Flexner counsel Mary Boies, Almaz Capital co-founder Charles Ryan and former justice and law professor Roanne Sragow Licht potentially joining, while current board member Judith McHale exits.
This is important because the expanded roster could help push through the settlement.
“We suspect the incoming board members were likely selected with the expectation they would help resolve the CBS dispute and clear the path for Skydance’s acquisition,” said Lightshed Partners analyst Rich Greenfield in a recent blog post. “The unknown element is whether the public apology is mandatory.”
Paramount’s deal with Skydance already triggered its first automatic 90-day extension, with the second set to take effect on July 7. If the second extension is triggered, the deal’s closing deadline would be pushed to Oct. 6. Paramount and Skydance would then have the option of terminating the deal, which would not be subject to its $400 million breakup fee. It’s unclear whether both parties would try to negotiate another extension in the event the deal is still not approved.
The FCC, whose chairman Brendan Carr has said the Trump-CBS settlement talks and merger review are unrelated, typically makes decisions within an informal 180-day timeframe.
But as Greenfield has previously pointed out, there’s no “forcing function” for the agency. The analyst has previously expressed concern the Skydance deal could potentially fall apart due to the paralysis caused by the lawsuit.
A rock and a hard place
If a settlement goes through, senators Bernie Sanders, Elizabeth Warren, Ron Wyden and California Senate Democrats have all warned Redstone that a settlement in exchange for regulatory approval could constitute a violation of federal anti-bribery laws.
The latter has already launched an investigation into the matter, inviting former “60 Minutes” executive producer Bill Owens and former CBS News president Wendy McMahon to testify.
Shareholders bringing derivative lawsuits against Paramount for the Skydance deal could also use a potential settlement as fuel for their argument that the board breached their fiduciary duties, Martin said.
While legal experts who previously spoke to TheWrap didn’t rule out legal action due to a potential settlement, they have dismissed the notion of bribery charges as a “non-case.”
If the deal falls through, Redstone’s National Amusements would have six months from the termination date to pay back the Ellison family and RedBird Capital Partners, who agreed to loan up to $277 million prior to the Skydance deal closing, according to the deal’s FCC application. The individual familiar with the matter emphasized that Redstone would have the option of refinancing.
Redstone also received a preferred equity investment of $175 million from Byron Trott’s BDT/MSD Partners, though the warrants attached aren’t exercisable until 2028, according to an SEC filing.
When it comes to strategic options, Greenfield floated the possibility of alternatively looking at selling a minority stake in NAI of no more than 49.9% to a third party, which may avoid triggering the change of control that required FCC approval in the first place.
But as one Wall Street investor who wished to remain anonymous pointed out, there’s not much reason for any bidder to be interested in that option unless it eventually leads to a path to control under a “more friendly” political environment.
“The hard part about that is Shari Redstone doesn’t have a large economic stake,” the investor said. “Her voting stock is worth a gigantic premium because it represents control. If somebody’s not buying control, she’s not going to get that kind of premium.”
As for Paramount, former FCC commissioner and Cooley LLP partner Rob McDowell recently warned the company would become a “melting ice cube.” Despite turning an overall profit in its latest quarter, Paramount suffered a 6% hit to total revenue due to declines in its TV/media business. That decline was offset by its streaming business, which continues to grow revenue and narrows its losses and is on track to reach domestic profitability this year.
Thus far, the strategy under Paramount’s co-CEO structure has been to cut costs and explore content licensing, bundling and distribution partnerships and potential asset sales, though they have been limited by the moves they can make due to the merger.
“The ecosystem is changing so quickly, and clearly Paramount has been rudderless,” S&P Global analyst Naveen Sarma told TheWrap. “[The Skydance deal collapsing] would just make digging out of that hole even harder for the existing management team if they end up taking the business back over.”
EMarketer senior analyst Paul Verna said a deal collapse could “accelerate an inevitable reckoning” with the company’s business model: a potential separation of assets. While Redstone has long opposed the idea, experts previously told TheWrap, they believe a break-up could create upside for Paramount’s stock.
“To a certain degree, it feels like her window for making choices is closed,” the cable industry veteran added. “Yes, there’s still choices to be made, but with many fewer options than she had six months ago or six years ago. In terms of where Paramount is financially, it doesn’t feel like there’s a lot of wiggle room.”
