Paramount Agrees to Merger with Skydance, End of Redstone Era

The Paramount Studios in Los Angeles, California, USA on Monday, April 29, 2024.

Eric Thayer | Bloomberg | Getty Images

Paramount Worldwide has agreed to merge with Skydance, concluding months of negotiations that would see the Redstone family divest from control of the storied film studio and media company.

Paramount's special committee approved the merger Sunday, days after Shari Redstone's National Amusements, Paramount's majority owner, reached another tentative agreement with Skydance, the production company best known for “Top Gun: Maverick.” A similar deal had been nipped in the bud weeks earlier.

The latest iteration of the deal will see the buying consortium, which includes private equity firms RedBird Capital Partners and KKR, invest more than $8 billion in Paramount and acquire National Amusements. The deal gives National Amusements an enterprise value of $2.4 billion, including $1.75 billion in equity.

Paramount's Class A shareholders will receive $23 each in cash or stock, while Class B shareholders will receive $15 per share, for a total of $4.5 billion in cash consideration available to public shareholders. As part of the deal, Skydance will also inject $1.5 billion in capital into Paramount's balance sheet.

“It's a new Paramount; it's not just a slogan,” RedBird's Jeff Shell, former CEO of NBCUniversal, said on a call with investors Monday. “We think it's a new day for these combined assets.”

Skydance founder David Ellison will lead the combined company as CEO, while Shell will take on the role of president.

The merger is subject to regulatory approval and is expected to close in the third quarter of 2025. There is also a 45-day “go-shopping” period during which Paramount's special committee can solicit other bids.

A completed merger with Skydance would represent a major change for Paramount's ownership, and for Hollywood as a whole.

The Redstone family has long controlled the film studio, known for films such as “The Godfather,” “Top Gun” and “Forrest Gump,” as well as the CBS broadcast network and cable television networks such as MTV and Nickelodeon.

Today, Ellison, 41, the son of Oracle founder and billionaire Larry Ellison, heads a major film studio and is part of Hollywood's elite.

“It’s been a long time since we’ve had a creative director lead one of the big Hollywood companies,” Shell said on Monday’s call. “And I think it’s really important when creativity is at the core.”

Paramount’s business — and its stock — has been a roller coaster, particularly over the past year as the longtime media giant battled a weak advertising market and continued loss of cable TV customers. Its flagship streaming platform, Paramount+, is not yet profitable.

Paramount shares fell about 5% on Monday.

'A New Paramount'

Tom Cruise attends the “Top Gun: Maverick” premiere in London.

Karwai Tang | Wireimage | Getty Images

The merger marks the end of the Redstones' decades-long tenure at the companies, which were previously split into two companies, CBS and Viacom.

“As you know, my father built Viacom and CBS by bringing together a group of the best assets in media, news and entertainment,” Redstone said in a memo to employees Sunday night. “While people often debated whether content or distribution ruled the day, my father guided all of his decisions by his belief that content was indeed king.”

On Monday, RedBird and Skydance executives noted the synergies between Skydance and Paramount, specifically highlighting the success of CBS and the company’s partnership with the National Football League. They discussed Paramount’s vision for the future, which includes an emphasis on Paramount Pictures films, CBS and sports and extracting as much value as possible from the declining traditional TV business.

“The core tenet behind this transaction is our desire to transform Skydance into a purely content-focused company, leveraging Paramount’s strength as one of the world’s premier storytelling companies,” Ellison said during the call Monday.

Ellison also set out to position Paramount as a “technological hybrid to meet the demands and needs of the changing marketplace.”

Shell and others noted that traditional TV activities are declining, but said they are confident it will remain a long-term, profitable industry.

Long and winding road

Shari Redstone, chairman of ViacomCBS, walks to the morning session of the annual Allen and Co. Sun Valley press conference in Sun Valley, Idaho, U.S., July 7, 2021.

Brian Losness | Reuters

The agreement marks the end of a lengthy sales process for Redstone and Paramount.

Late last year, Paramount began deal talks with interested buyers, including: at the time, Discovery of Warner Bros. In addition to industry headwinds, Paramount is also struggling with a massive debt load of nearly $15 billion, making a deal economically difficult.

In early January, a special committee of Paramount was formed to begin evaluating strategic alternatives, including a sale of the company.

Skydance and Paramount have moved closer to a deal in recent months, with Bob Bakish stepping down as CEO of Paramount and being replaced by three of the company's leaders.

The parties first agreed to a deal in early June, but a week later Redstone saw the deal called off.

Shortly thereafter, Paramount's newly appointed “Office of the CEO” — CBS CEO George Cheeks, Paramount Media Networks CEO Chris McCarthy and Paramount Pictures CEO Brian Robbins — began their plan to restructure the company by reducing debt and finding a streaming joint venture partner.

Paramount's current leadership, which will run the company until the deal closes, said in a memo to employees Sunday night that it would be “business as usual” until then. They would implement planned layoffs and cost-cutting measures and continue to pursue opportunities such as partnerships and divestitures.

The Skydance-led consortium on Monday signaled its support for the strategies, saying it had incorporated the cost-saving measures into its business model. Executives also said current management is exploring the sale of some assets that would support Skydance for the right price.

There may already be a pool of bidders, given the fluctuating interest in Paramount in recent weeks.

Media mogul Barry Diller recently showed interest in Paramount, and former media executive Edgar Bronfman Jr. reportedly has as well. Sony Pictures and private equity firm Apollo Global Management have also expressed interest in a takeover, CNBC previously reported.

The deal struck by National Amusements and Skydance gives other potential bidders 45 days to submit a bid. If Paramount's special committee opts for a different bid, the Skydance-led consortium would receive a $400 million breakup fee.

Upon completion of the transaction, Skydance will own all of Paramount's Class A shares and 69% of Paramount's outstanding Class B shares.

The merger values ​​Skydance at $4.75 billion, with shareholders receiving $317 million in Class B shares, valued at $15 per share.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.

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