Paramount Global and Skydance Media are making significant progress towards a merger deal that would involve the buyout of controlling shareholder Shari Redstone. Paramount Global’s special committee, along with David Ellison’s Skydance Media, backed by private equity firms KKR and RedBird Capital Partners, are currently in discussions to determine the value of Skydance’s assets for the merger. It is estimated that Skydance will be valued at around $5 billion and merged with Paramount Global. The buyers plan to raise approximately $4.5 billion to $5 billion in new equity, with a portion being used to pay Redstone and another part to pay down debt.
The parties involved aim to finalize the deal in May, although Paramount Global’s delay in opening a data room to the Skydance consortium has slightly pushed back the timeline. The exclusivity window on merger talks is set to end on May 3, but the Skydance consortium is looking to extend it by two weeks. If the merger goes through, David Ellison is expected to be named CEO of Paramount Global, with former NBCUniversal CEO Jeff Shell serving as president, while current CEO Bob Bakish will depart from the company.
Meanwhile, Apollo and Sony have had preliminary discussions about a potential deal to buy out all Paramount Global shareholders at a premium. However, the special committee has not received concrete details about this offer and does not view it as a competitive bid compared to Skydance’s interest. The committee favored Skydance’s offer because it provides shareholders with future upside by keeping the company public and maintaining a cleaner balance sheet.
Despite the progress being made, there is still one significant obstacle that remains – Paramount Global’s renewal agreement with Charter Communications for CBS and its cable networks. The outcome of this agreement could impact the value of Paramount Global if Charter drops the networks or agrees to a lower carriage rate. The deadline for the agreement is April 30, with Paramount Global reporting first-quarter earnings on April 29. The company heavily relies on its traditional TV business, which accounts for about two-thirds of its total revenue.
There are concerns that Charter may prove to be a tough negotiator, as it briefly stopped carrying Disney’s networks last year during renewal negotiations. Paramount’s cable networks are less popular than Disney’s ESPN, potentially putting Bakish in a position of weakness. The timing of the renewal agreement and the deal talks creates an awkward dynamic, where Bakish, who would ultimately leave the company under a Skydance merger, will have control over Paramount Global’s fate with Charter.
Bakish has privately opposed the Skydance deal, as he believes it dilutes common shareholders. Some Paramount Global investors have also voiced their concerns and written letters to the company’s board, urging them not to proceed with the merger. They argue that the deal gives Redstone a significant premium for her controlling shares while disregarding common shareholders.
Under the terms of the proposed deal, Skydance and its private equity partners would own nearly 50% of the company, while the rest would be owned by common shareholders. Paramount Global would continue to trade publicly.
Overall, the merger between Paramount Global and Skydance Media is progressing, but there are still challenges and uncertainties ahead. The outcome of the renewal agreement with Charter Communications will play a crucial role in determining the value and success of the merger. The conflicting interests and concerns of stakeholders further complicate the situation. As negotiations continue, it remains to be seen whether this merger will come to fruition and how it will impact all parties involved.
