Paramount and Skydance, two major entertainment companies, have reached an agreement to merge, according to CNBC’s David Faber. This deal, which is awaiting approval from Paramount’s controlling shareholder, Shari Redstone, could be announced in the coming days.
The merger involves a buying consortium led by David Ellison’s Skydance, along with backing from private equity firms RedBird Capital and KKR. Under the terms of the agreement, Redstone would receive $2 billion for her company, National Amusements, which holds a 77% stake in class A Paramount shares. Skydance would acquire nearly 50% of class B Paramount shares at $15 per share, totaling $4.5 billion. This would leave the remaining class B shareholders with equity in the newly merged company.
To help reduce debt, Skydance and RedBird have also committed to contributing $1.5 billion in cash to Paramount’s balance sheet. Following the completion of the deal, Skydance and RedBird would own two-thirds of Paramount, while the class B shareholders would retain the remaining third.
What’s interesting is that the deal does not require a vote from the shareholders, which was a point of negotiation. Paramount’s annual shareholder meeting is scheduled for Tuesday. The negotiated terms were previously reported by The Wall Street Journal.
The total value of the deal has increased to $8 billion from the initial offer. Earlier on, Skydance’s offer was valued at around $5 billion. The new terms are more favorable to Redstone, as she would have received less than $2 billion under the previous offer. Additionally, the class B shareholders would have been bought out at a lower price of $11 per share.
Prior to this merger agreement, Apollo Global Management and Sony Pictures had expressed interest in acquiring Paramount for approximately $26 billion. However, Redstone preferred a deal that would keep Paramount intact, while Apollo and Sony had planned to break up the company.
It’s worth noting that Paramount has experienced changes in its leadership team in recent months. Former CEO Bob Bakish stepped down in late April, and the company is now led by what is known as the “Office of the CEO,” consisting of CBS President and CEO George Cheeks, Chris McCarthy (president and CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks), and Brian Robbins (head of Paramount Pictures and Nickelodeon).
In conclusion, the merger between Paramount and Skydance, backed by RedBird Capital and KKR, is set to bring significant changes to the entertainment industry. The deal, valued at $8 billion, will reshape Paramount’s ownership structure and reduce its debt. While negotiations with other interested parties took place, Redstone’s preference for maintaining the company’s unity played a crucial role in finalizing this agreement. With a revamped leadership team in place, Paramount is poised to embrace a new era of growth and innovation.
