Paramount and Skydance Agree to Deal Terms as Merger Inches Closer, Shares Rise Over 7%

The deal awaits approval from controlling shareholder Shari Redstone

Skydance Media CEO David Ellison and National Amusements President Shari Redstone
Skydance Media CEO David Ellison and National Amusements President Shari Redstone (Getty Images / Illustration by TheWrap)

Paramount Global and David Ellison’s Skydance Media have agreed to deal terms on a potential merger, which currently awaits approval from controlling shareholder Shari Redstone, an individual familiar with the matter told TheWrap on Monday.

Skydance’s latest offer, which is backed by a consortium of investors including RedBird Capital and KKR and has received support from the media conglomerate’s independent special committee, would give Redstone $2 billion for National Amusements, which owns 77% of Paramount’s class A voting stock and 5.2% of its class B common stock. The second step would then see Skydance merge with Paramount to create a combined company. In total, the deal would be valued at around $8 billion, up from the $5 billion previously discussed.

Skydance and RedBird will contribute $1.5 billion in cash to help reduce debt. Additionally, Skydance will buy out nearly 50% of class B Paramount shares at $15 apiece. Following closing, Skydance and RedBird would own two thirds of Paramount, while class B shareholders would own the remaining third.

The deal will not require a vote from shareholders. Paramount will hold its annual shareholder meeting on Tuesday, where four members of the board of directors, including three who are on the special committee, will step down.

“We received the financial terms of the proposed Paramount/Skydance transaction over the weekend and we are reviewing them,” a National Amusements spokesperson told TheWrap.

Representatives for Paramount and Skydance declined to comment. News of the two parties’ agreement on terms was first reported by CNBC.

The latest update comes as Paramount’s minority investors have pushed back on the Skydance deal, arguing that it would prioritize Redstone at the expense of the rest of the company’s investors. In an effort to appease those investors, Skydance submitted a revised offer in April that included a $3 billion cash injection as well as a premium sweetener for a percentage of non-voting class B shares. Though the special committee let the exclusivity window on negotiations with Skydance expire with no deal last month, the two parties have continued to explore a possible deal.

In addition to Skydance, Sony Pictures Entertainment and Apollo Global Management submitted a joint $26 billion all-cash offer for the company, which would see the former take a majority stake and operational control and the latter take a minority stake. That bid followed a separate offer by Apollo to solely acquire Paramount Pictures, which was rebuffed. While the pair signed NDAs to begin discussions with Paramount, The New York Times reported that they have since backed away from the original offer.

Redstone has long been opposed to any deal for the company that breaks up its assets, though an individual familiar with her thinking previously told TheWrap that she is open to finding a deal in the best interest of Paramount shareholders and supports the independent special committee reviewing the Sony-Apollo bid. However, Sony and Apollo could potentially run into regulatory scrutiny due to the FCC’s limitations on foreign ownership and national television ownership.

The Wall Street Journal reports that Hollywood producer Steven Paul has also been lining up financing for a bid for National Amusements of around $3 billion and that at least one other investor group has also expressed interest in purchasing National Amusements, citing sources familiar with the matter. A representative for Paul did not immediately respond to TheWrap’s request for comment.

Paramount also has the option of continuing to go it alone with its newly formed Office of the CEO, which replaced former CEO Bob Bakish and is comprised of three top executives: Brian Robbins, George Cheeks and Chris McCarthy. The Office of the CEO will hold a town hall with employees on Wednesday.

Shares of Paramount, which climbed over 7% on Monday to $12.78 per share, have fallen 19.8% int the past six months, 11% year to date and 15% in the past year. The company’s market capitalization currently sits at $8.9 billion. In March, Paramount’s credit rating was downgraded to junk status by S&P Global.

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