Paramount Shares Plunge After Shari Redstone Cancels Skydance Deal

Shares of Paramount Global (PARA) sank nearly 8% on Tuesday after Shari Redstone, who controls Paramount through her family’s holding company National Amusements (NAI), ended merger talks with Skydance Media, confirmed the NAI in a statement.

As first reported by Wall Street JournalRedstone will now likely pursue a sale of just NAI rather than trying to merge Paramount into another company. Hollywood producer Steven Paul would have expressed interest, together with the media executive Edgar Bronfman Jr..

It’s a surprising development considering that a special independent committee of Paramount’s board recently recommended saving the Skydance deal after months of negotiations. The Journal said the committee was scheduled to vote on Paramount’s merger with Skydance on Tuesday afternoon.

In a statement, National Amusements said it was unable “to reach mutually acceptable terms regarding the potential transaction with Skydance Media to acquire a controlling interest in NAI.”

“NAI is grateful to Skydance for their months of work in pursuing this potential transaction and looks forward to the continued and successful production collaboration between Paramount and Skydance,” the statement read. It will continue to support and “explore opportunities to drive value creation for all Paramount shareholders.” Paramount declined to comment.

Outside of Skydance, other Paramount stakeholders include Sony Pictures Entertainment and private equity firm Apollo Global Management, along with Warner Bros. Discovery (WBD), media mogul Byron Allen and others. (Disclosure: Yahoo Finance is owned by Apollo.)

Notably, Shari Redstone has always favored the Skydance deal compared to other offers, according to multiple reports.

Skydance, which has collaborated with Paramount to produce popular film franchises including “Mission: Impossible,” “Top Gun: Maverick” and “Transformers,” revised your offer several times after non-voting shareholders expressed concerns about the terms of its first deal, which was valued at $5 billion.

The latest offer, valued at $8 billion, included Shari Redstone selling a controlling stake in National Amusements at Paramount for about $2 billion, according to CNBC. National Amusements owns approximately 10% of Paramount’s share capital and holds 77% of the voting shares.

Backed by private equity firms RedBird Capital and KKR, Skydance would then have merged its studio business with that of Paramount at a reported price that valued the media giant’s legacy at just under $5 billion. Skydance and its affiliates also reportedly offered a $1.5 billion cash injection to help reduce Paramount’s debt, the report added.

The story continues

Skydance offered to buy about half of Paramount’s non-voting shares for $4.5 billion, or about $15 per share, CNBC said. As first reported by Wall Street Journal, Non-voting shareholders would have the option to cash out about half of their shares at a premium of $15, with the remainder of the shares being converted into shares of the newly merged company.

A separate report from Bloomberg said investors in Paramount’s voting shares outside the Redstone family would be guaranteed a price of $23 per share.

Amid the merger drama, Paramount announced the departure of CEO Bob Bakish in late April after he was allegedly at odds with Redstone about the Skydance deal. It has since been replaced by an “Office of the CEO” consortium made up of the company’s three division heads.

Last week, executives gathered for the company’s annual shareholder meeting – despite the unknowns surrounding its future.

At the time, the CEOs revealed a plan to cut costs worth $500 million, which will include layoffs, as well as exploring potential asset sales and partnerships with competitors for streaming joint ventures.

“We all agree that Paramount is not where we want it to be,” co-CEO Chris McCarthy said during the meeting. “Given the strength of our assets, our people and our long-term competitive advantage from producing some of the biggest and broadest hits, we know there is significant value to be unlocked.”

Management said it is prepared to move quickly on cost reductions and that $500 million in cost savings is “just the beginning,” with more announcements expected in August — pending, of course, a potential sale.

“We are confident that the business can be managed much more efficiently, adjusting to the realities of the environment in which we operate today,” said co-CEO George Cheeks, who cited duplicate teams and functions in several areas such as real estate, technology and marketing. “These cost reductions will be an important step in positioning the company for long-term sustainable growth.”

Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, and email her at alexandra.canal@yahoofinance.com.

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