Paramount and Skydance agree to terms of a merger deal

Paramount and Skydance have agreed to terms of a merger, CNBC’s David Faber reported Monday. A deal could be announced in the coming days, he said.

A Paramount special committee and the buying consortium — David Ellison’s Skydance, backed by private equity firms RedBird Capital and KKR — agreed to the terms. The deal is awaiting signoff from Paramount’s controlling shareholder, Shari Redstone, who owns National Amusements, which owns 77% of class A Paramount shares, Faber said Monday.

The agreement terms come after weeks of discussion and a recent competing offer from Apollo Global Management and Sony Pictures.

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

The deal currently calls for Redstone to receive $2 billion for National Amusements, Faber reported Monday. Skydance would buy out nearly 50% of class B Paramount shares at $15 apiece, or $4.5 billion, leaving the holders with equity in the new company.

Skydance and RedBird would also contribute $1.5 billion in cash to Paramount’s balance sheet to help reduce debt.

Following the deal’s close, Skydance and RedBird would own two-thirds of Paramount, and the class B shareholders would own the remaining third of the company, Faber reported. The negotiated terms were reported earlier by The Wall Street Journal.

The deal will not require a vote from the shareholders, which was part of the negotiations, Faber reported. Paramount’s annual shareholder meeting will take place on Tuesday.

The deal is valued at $8 billion, an increase from the $5 billion offer on the table earlier. Under those earlier terms, Redstone would have received less than $2 billion for her stake, and the class B shareholders would have been bought out at a nearly 30% premium at $11 a share, CNBC previously reported.

In early May, Apollo and Sony formally expressed interest in acquiring Paramount for about $26 billion, CNBC previously reported. However, Redstone has favored a deal that would keep Paramount together, and Apollo and Sony planned to break up the company, CNBC previously reported.

In addition to the twists and turns of the negotiations with buyers, Paramount’s C-suite has also undergone a shakeup in recent months.

Bob Bakish stepped down as CEO in late April and was replaced by what the company calls the “Office of the CEO.” Paramount is now led by three executives: George Cheeks, CBS president and CEO; Chris McCarthy, president and CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks; and Brian Robbins, the head of Paramount Pictures and Nickelodeon.

The three execs who lead Paramount Global‘s “Office of the CEO” have called off their planned town hall meeting with employees that had been scheduled for Wednesday, June 5, citing “ongoing speculation regarding potential M&A.”

The trio — CBS CEO George Cheeks, Paramount CEO Brian Robbins and Chris McCarthy, CEO of Showtime/MTV Entertainment Studios — rescheduled the event for June 25. The move comes as Shari Redstone is evaluating a merger offer from David Ellison’s Skydance Media, which the Paramount Global board’s special committee has recommended and submitted for Redstone’s review over the weekend. Redstone is Paramount non-executive chair and the company’s controlling shareholder through National Amusements Inc.

“Given the ongoing speculation regarding potential M&A, we want to be able to speak to you with as much candor and transparency as possible,” the three executives wrote in a memo to employees. “By moving the date, our hope is to do just that.”

Earlier in the day, at the company’s 2024 meeting of shareholders, the troika — proudly introduced by Redstone — talked about their strategic “vision” going forward and outlined the plans as if Paramount will not be sold.

At the June 4 meeting, they spoke at a high level about how they plan to cut upwards of half a billion in costs annually through layoffs and other cost-reduction measures, pursue a joint venture to gain streaming scale for Paramount+ and potentially sell some assets to shore up the balance sheet. “To be clear, $500 million in cost savings is just the beginning,” Cheeks said, adding that they expect to provide more details on the Q2 2024 earnings call in August.

Prior to the shareholder meeting’s Q&A portion, McCarthy alluded to the Skydance offer on the table without mentioning it by name but said “we cannot comment” on “speculation” about a potential M&A event.

Cheeks, McCarthy and Robbins were installed after Redstone booted former CEO Bob Bakish on April 30, reportedly over Chapek’s clash with Redstone over pursuing the deal with Skydance.

Yet another name has surfaced in the Paramount Global scrum as former entertainment executive and beverage billionaire Edgar Bronfman Jr. is eyeing control of the company in a deal scenario with multiple moving pieces, even as Shari Redstone‘s camp remains deep in talks with Skydance.

Takeover speculation has engulfed Paramount since last October and Skydance surfaced shortly after, so it’s been a long slog. In May, Par’s CEO departed. In June, four board members stepped down.

Bronfman is the latest potential buyer to emerge for Redstone’s controlling stake in Paramount, backed by Bain Capital. Deadline has confirmed his interest, which comes as producer Steven Paul has assembled a group of deep-pocketed investors for a deal. Both are looking at an acquisition of Redstone’s family holding company NAI, which owns about 80% of Paramount Global‘s Class A voting stock, meaning a change in ownership of a public company, not a merger.

Meanwhile, Redstone and NAI intensified talks with David Ellison‘s Skydance over the weekend on what would be a much more complex deal. Two steps would see Skydance — backed by Oracle’s Larry Ellison and Gerry Cardinale’s RedBird Capital — acquire control of Paramount from Redstone, and then merge Skydance with Paramount in an all-stock transaction. That second part would dilute existing shareholders, most of whom hold Class B non-voting stock. Those investors have been furious and threatened to sue, which pushed Skydance to sweeten the pot for them in two revised offers; the latest included buying out about half of the outstanding B shares at a premium. To find the cash to do that, Skydance trimmed the payout to Redstone for NAI to about $2.25 billion.

The offers from Bronfman and Paul for Redstone’s stake in Paramount are said to be higher.
Family-owned businesses especially in media often have two classes of stock to ensure control. The idea is that shareholders know that when they invest. So they may have less standing to sue in a change of control situation.

Bronfman’s family acquired Seagram in the 1920s and built it into an industry leader. With Edgar Jr. at the helm, Seagram acquired Universal in 1995 and he became a big player in Hollywood. He sold the company to Vivendi (and the liquor business separately) and was executive chair of Vivendi Universal for a time, eventually stepping down. He later acquired Warner Music Group, in 2004 and ran it until the sale to Len Blavatnik’s Access Industries in 2011.

“Bronfman is very real. He can come up with the money,” said a well-positioned source of the former Universal owner’s eleventh-hour entry. “But it won’t stop the lawsuits.”

One Wall Streeter noted that Redstone’s father Sumner Redstone was notoriously litigious and finds ironic the potential legal battles looming over the sale of Paramount, whatever happens. Determining who will bear the cost of eventual litigation is one of the points under discussion with Skydance as talks move ahead.

Paul, founder of Crystal Sky Entertainment and a handful of sister companies, is friendly with Redstone and has some ties to Paramount. It’s not clear who all his partners are in a potential deal but news reports have mentioned John Paul DeJoria, co-founder of Paul Mitchell hair care and Patrón Spirits, and Norwegian American investor Philip Odegarde.

Deadline hears that Sony is continuing due diligence, although partner Apollo has been very quiet.

Paramount shares have been volatile over nine months of deal speculation. They began to slip last week after the Skydance deal got a stamp of approval from the board committee and went to Redstone, with no announcement forthcoming. The stock is trading off about 1% today at $11.93 — well below a 52-week high near $18.

Paramount and Skydance have agreed to terms of a merger, CNBC’s David Faber reported Monday. A deal could be announced in the coming days, he said.

A Paramount special committee and the buying consortium — David Ellison’s Skydance, backed by private equity firms RedBird Capital and KKR — agreed to the terms. The deal is awaiting signoff from Paramount’s controlling shareholder, Shari Redstone, who owns National Amusements, which owns 77% of class A Paramount shares, Faber said Monday.

The agreement terms come after weeks of discussion and a recent competing offer from Apollo Global Management and Sony Pictures.