Paramount and Skydance on the Brink of Landmark Merger Deal

The entertainment landscape is in the midst of a significant shift due to a staggering development. Paramount Global and Skydance Media, led by David Ellison, are on the brink of a monumental merger, pending approval from controlling shareholder Shari Redstone.

Under the terms of the agreement, Skydance, bolstered by a coalition of investors including RedBird Capital and KKR, will pay a staggering $2 billion to acquire National Amusements, a move that would transfer ownership of 77% of Paramount’s class A voting stock and 5.2% of its class B common stock to Skydance. This strategic maneuver would effectively set the stage for the subsequent merger between Skydance and Paramount. The deal is currently valued at $8 billion, a significant jump from the previous $5 billion offer.

The impending deal, which circumvents the need for shareholder approval, coincides with Paramount’s forthcoming annual shareholder meeting, during which four members of the board of directors, including three from the independent special committee, are expected to step down.

To mitigate debt concerns, Skydance and RedBird will infuse $1.5 billion in cash. Moreover, Skydance will initiate a buyout of nearly 50% of Paramount’s class B shares at $15 per share. Following the completion of the merger, Skydance and RedBird will command a two-thirds stake in Paramount, while the remaining third will be retained by class B shareholders.

This development unfolds against a backdrop of resistance from Paramount’s minority investors, who have voiced concerns about the proposed merger’s potential to prioritize Redstone’s interests over those of other stakeholders. In response, Skydance revised its offer in April, injecting an additional $3 billion in cash and introducing incentives for non-voting class B shares.

In a parallel bid, Sony Pictures Entertainment and Apollo Global Management tabled a joint $26 billion all-cash offer for Paramount, with Sony eyeing a majority stake and operational control, while Apollo aimed for a minority stake. However, regulatory hurdles loom large for this proposal due to FCC restrictions on foreign ownership and national television ownership.

Meanwhile, Hollywood producer Steven Paul is reportedly mobilizing financing for a separate bid of around $3 billion for National Amusements, with additional investor groups expressing interest in acquiring the company.

Amid these developments, Paramount has the option of charting its course independently, following the restructuring initiated by its newly formed “Office of the CEO,” which supplanted former CEO Bob Bakish. The Office of the CEO is slated to engage in dialogue with employees via a town hall scheduled for Wednesday, signaling a pivotal moment in Paramount’s trajectory.