Skydance Triumphs in Paramount Global Acquisition

In a landmark deal set to reshape the entertainment industry, Shari Redstone has agreed to sell control of Paramount Global to a consortium led by David Ellison’s Skydance and Gerry Cardinale’s RedBird Capital. This pivotal move, pending regulatory approval and the absence of a superior bid, would transfer Redstone’s majority stake in National Amusements to the Skydance consortium, which would subsequently gain control of Paramount Global. Paramount encompasses Paramount film and TV studios, the streaming service Paramount+, CBS, and cable networks such as Nickelodeon, MTV, and Comedy Central.

The culmination of this deal follows months of intense speculation, as the Skydance consortium initiated discussions late last year. Talks had previously faltered, with Redstone rejecting a deal just last month. However, continued negotiations ultimately resulted in an agreement that received Redstone’s endorsement.

Once finalized, Paramount plans to acquire Skydance, implementing its leadership team. David Ellison will assume the role of CEO, and Jeff Shell, former NBCUniversal CEO, currently with RedBird, will manage daily operations as president.

To address previous concerns from non-voting Paramount shareholders about potential dilution, Skydance bolstered its offer to ensure greater value. Under the terms of the agreement, the Skydance consortium will invest $2.4 billion in cash to acquire National Amusements, and $4.5 billion in stock and cash for the merger consideration for publicly traded Class A and Class B shares. Additionally, $1.5 billion in primary capital will be added to Paramount’s financial reserves.

This transaction not only enables Redstone to cash out but also provides liquidity to other Class A and Class B shareholders, with shares priced at $23 and $15 respectively. Upon closing, Skydance expects to hold 70% of the outstanding shares.

The merger values Ellison’s studio, Skydance, at $4.75 billion. Founded by Sumner Redstone, National Amusements evolved from a regional theater chain into a media giant by acquiring Viacom, Paramount, and CBS. Despite owning only about 10% of Paramount’s equity, National Amusements controls approximately 80% of its voting stock, which grants it significant influence.

Shari Redstone, who took over after her father’s passing in 2020, reflected on her father’s legacy and vision for Paramount. “In 1987, my father, Sumner Redstone, acquired Viacom and began assembling and growing the businesses known today as Paramount Global. He believed that ‘content was king’ and was always committed to delivering high-quality content worldwide. This vision has been the cornerstone of Paramount’s success, driven by the talented and dedicated individuals working at the company.”

Addressing the evolving media landscape, Redstone continued, “Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king. The Skydance transaction will support Paramount’s success in this dynamic environment. As a long-time collaborator with Paramount, Skydance is well-acquainted with the company and has the strategic vision and resources to propel it to new heights.”

David Ellison expressed his gratitude, noting, “This is a defining moment for our industry and those invested in the Paramount legacy. I am incredibly grateful to Shari Redstone and her family for trusting us to lead Paramount. We are committed to energizing the business with contemporary technology, new leadership, and creative excellence to benefit future generations.”

Gerry Cardinale acknowledged the significance of the recapitalization and Skydance’s acquisition of Paramount, commenting, “This merger under David Ellison’s leadership is a pivotal moment for the entertainment industry. Paramount has the intellectual property foundation to thrive amid technological shifts, but it requires visionary leadership and strong operational management. RedBird’s investment reflects our belief that the new leadership team will set the standard for managing legacy media companies in the future.”

By acquiring a majority stake in National Amusements, Skydance will gain control of Paramount’s expansive intellectual property and prestigious entities, including film studios, a broadcast network, a streaming service, and cable channels.

Recently, speculation around Paramount’s future has intensified, especially with its struggling streaming business, a declining linear TV segment, and a precarious credit rating. Other companies like Apollo and Sony have also shown interest in Paramount, which replaced former CEO Bob Bakish with a trio of executives in April.

National Amusements has faced its own challenges, accepting a $125 million strategic investment from BDT & MSD Partners in May to alleviate debt and repay loans. Paramount’s debt was downgraded to BB+ by S&P Global in March, signaling a “junk” status due to declining linear media and the uncertainties surrounding the streaming model.

Despite a difficult period, the co-CEOs of Paramount – Brian Robbins, George Cheeks, and Chris McCarthy – have been working on optimizing operations, aiming for sustainable transformation and growth.

Charles Phillips, Paramount board member and special committee chair, praised their efforts, “The Special Committee thanks George Cheeks, Chris McCarthy, and Brian Robbins for their substantial progress in optimizing company operations in a short time, positioning Paramount for sustainable transformation and profitable growth.”

With Skydance preparing to take control and introduce a new strategy and leadership, the entire entertainment industry and Wall Street are closely monitoring developments.

Source: source names