(Bloomberg) — Paramount Global Chairman Shari Redstone dropped a bid to merge her family’s media company with David Ellison’s Skydance Media, ending months of tense negotiations that would have capped the Redstones’ decades-long tenure ahead of the owner of CBS and MTV.
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A special board committee met Tuesday to discuss a complicated deal proposed by Ellison that would have seen Redstone sell him his family’s National Amusements Inc., the holding company that controls 77% of Paramount’s voting shares. . But before the meeting ended, Redstone representatives informed the committee that the NAI had not reached an agreement with Skydance, a dramatic reversal considering Redstone’s initial support.
Redstone pushed for Paramount’s merger with Skydance over other potential deals, seeking a transaction that she believed would be in the best interests of her family and the company’s legacy. But she changed her mind after resistance from company management and shareholders led Ellison to revise his offer.
Ellison changed the terms in an effort to appease everyone – not just the Redstones, but also Paramount shareholders who refused a deal that paid a premium to the Redstones and diluted other investors. Ellison invested more money for shareholders and money to pay down debt, and also offered to help cover potential legal costs. Redstone was sued after the Viacom-CBS merger and feared being sued again over the Ellison deal.
Redstone will now pursue the sale of just National Amusements rather than trying to merge Paramount with another company, people familiar with the discussions said, asking not to be identified discussing nonpublic information.
“NAI is grateful to Skydance for their months of work in pursuing this potential transaction and looks forward to the continued successful production collaboration between Paramount and Skydance,” National Amusements said in a statement.
The Wall Street Journal previously reported the end of discussions.
Paramount shares fell about 8% on the news, ending the day at $11.04, as investors braced for another period of negotiations and uncertainty. Although shareholders initially resisted Ellison’s deal, they accepted his revised terms.
Ellison, the son of Oracle Corp. co-founder Larry Ellison, has been chasing Paramount for months, sensing a rare opportunity to own one of Hollywood’s oldest studios. Founded in 1912, Paramount Pictures is the home of The Godfather, Star Trek and Forrest Gump. It has been controlled for three decades by the Redstone family and National Amusements. But the stock has lost more than half its value since the Redstones combined CBS Corp. and Viacom Inc. in 2019 to create Paramount Global.
The Redstones are considering a sale because the business faces major challenges. Saddled with more than $14 billion in debt, the company has struggled to compete in streaming and has suffered as cable audiences cancel subscriptions and abandon traditional channels like CBS and Nickelodeon. His eponymous studio has struggled to make money. New owners and additional capital could give beleaguered Paramount a fresh start.
Redstone, 70, has received interest from at least five potential suitors for the famous film and TV company, including Sony Group Corp. and Apollo Global Management Inc., which proposed a $26 billion deal. But that bid, which would involve a foreign owner and the potential consolidation of two major Hollywood studios, was seen as problematic and would likely face strict regulatory scrutiny.
Hollywood film producer Steven Paul assembled an investment group that includes the billionaire tequila co-founder Patrón and made an offer more than 10% above Ellison’s. Media mogul Edgar Bronfman, backed by private equity firm Bain Capital, has also expressed interest with an offer worth more than $2 billion.
As part of Ellison’s proposed transaction, he and his partners, including RedBird Capital Partners and KKR & Co., would have purchased National Amusements for $2.25 billion and injected $1.5 billion into the balance sheet to pay down some of the debt. from Paramount.
The Ellison group reportedly contributed $4.5 billion in additional cash to purchase shares of Paramount. Up to 50% of Paramount’s non-voting Class B shareholders would receive $15 per share and all non-Redstone family Class A shareholders would receive $23 per share, according to people familiar with the discussions, who asked not to be identified discussing information that is not public.
The remaining shares would be transferred to a new company, valuing Skydance at $4.75 billion.
Selling just NAI is an easier path for Redstone than what Ellison was offering.
–With assistance from Hannah Miller.
(Updates with company statement and history of agreement negotiations.)
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