(Bloomberg) — Paramount Global has agreed to merge with Skydance Media in a deal that hands control of the famed Hollywood studio to producer David Ellison, capping one of the industry’s most dramatic acquisitions.
Bloomberg’s Most Read
As part of the complicated deal that took months to make, Paramount President Shari Redstone agreed to sell her family’s National Amusements Inc., which controls about 77% of Paramount’s voting shares, for $ 2.4 billion, according to a company statement. on Sunday.
The deal marks an abrupt turnaround after negotiations between Redstone and Ellison, the son of Oracle Corp. co-founder Larry Ellison, broke down last month. Redstone’s decision to end discussions shocked the board and frustrated employees and investors, sending shares plunging.
But Ellison and Redstone stayed in touch and worked to resolve their differences. Redstone had long made it clear that he thought Ellison, an upstart movie mogul, made the most sense for Paramount and represented the best opportunity to protect his family’s legacy. In recent weeks, Ellison has made some changes to the agreement, including offering more protection against potential shareholder lawsuits.
Under the terms of the new agreement, the Ellison family and RedBird Capital Partners have agreed to invest more than $8 billion in the business. This includes $1.5 billion to help pay down Paramount’s debt and $4.5 billion to buy Paramount stock.
The deal would allow non-Redstone voting shareholders to withdraw $23 per share or transfer their shares to the new company. Non-voting shareholders could receive $15 per share in cash or 1 share of the new company. These terms represent a 48% premium for non-voting shareholders and a 28% premium for voting shareholders compared to Paramount’s share price on July 1.
Upon completion of the deal, scheduled for the first half of 2025, the group led by Ellison will hold approximately 70% of Paramount’s outstanding shares. Sellers have 45 days to look for better offers. The Skydance deal includes a $400 million termination fee if it falls apart.
Paramount shares fell 4.5% on Monday morning to $11.28 in New York. They are down 24% so far this year.
New owners and additional capital could provide a fresh start for beleaguered Paramount, parent company of CBS and MTV. Saddled with debts of more than $14 billion, the iconic Hollywood company has struggled to compete in streaming and has suffered as audiences cancel subscriptions to cable television and abandon traditional channels like CBS and Nickelodeon. The company had a net loss of $554 million, or 87 cents per share, in the first quarter.
“Given the changes in the industry, we want to strengthen Paramount for the future while ensuring that content remains king,” Redstone said in the statement. “As a long-time production partner of Paramount, Skydance knows Paramount well and has a clear strategic vision and the resources to take it to the next stage of growth. We believe in Paramount and we always will.”
Ellison, 41, will be president and CEO. Jeff Shell, a former NBCUniversal executive, will serve as president. Ellison, who grew up around Silicon Valley luminaries like Steve Jobs, believes the company could prosper if it invested more in technology. Skydance will use artificial intelligence to “supercharge content creation capabilities that improve overall productivity and reduce costs,” the company said.
Paramount, which owns the film studio behind films such as Titanic and The Godfather, has been controlled for three decades by the Redstone family. But the stock has lost more than half its value since the Redstones recombined CBS Corp. and Viacom Inc. in 2019 to create Paramount Global.
Ellison has been chasing Paramount for months, sensing a rare opportunity to own one of Hollywood’s most iconic studios. Ellison said Paramount, as a traditional media company, “needs to double down on storytelling, but it really needs to transition to being a hybrid technology company.” In a conference call with analysts, Ellison noted that big technology companies have been moving aggressively into the media space and that for Paramount to succeed, it needs to become a technology company. “Bringing technology and media together is essential to charting a course in this environment,” he said.
Redstone, 70, pushed for Paramount’s merger with Skydance through an agreement with other interested parties and despite opposition from the company’s management and other shareholders, the resignation of four board members and the looming specter of litigation.
She fired the company’s CEO, Bob Bakish, a skeptic of the deal, replacing him with a management committee of three leaders who promised $500 million in annual cost savings. The Skydance deal will produce about $2 billion in cost savings, the companies said.
Just as a deal with Skydance seemed imminent last month and a special board committee met to discuss the proposal, Redstone backed out.
By this time, Ellison had lowered his bid for Redstone’s National Amusements so he could give more money to other Paramount shareholders, an obstacle to the company agreeing to the deal but one that disheartened Redstone.
Paramount, which was purchased by Shari Redstone’s late father Sumner in 1994, has been for sale since late last year. National Amusements has held talks with several suitors, 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.
More recently, Barry Diller, the 82-year-old chairman of IAC Inc. and former head of Paramount Pictures, expressed interest in the company. So did longtime media executive Edgar Bronfman Jr.
Until the deal is completed, Paramount’s three CEOs will continue with their plans to reduce costs through job cuts and look for opportunities for streaming joint ventures and more possibilities to license content to other networks.
Ellison reiterated the company’s commitment to its money-losing direct-to-consumer streaming services, noting that better technology, such as an improved discovery system, could bolster the user experience on Paramount+ and decrease subscriber churn.
“While people often debated whether content or distribution ruled the day, my father was governed in all his decisions by his belief that content was indeed king,” Redstone told employees in an internal memo seen by Bloomberg . “We continue to create content that resonates with our consumers, that they continually seek out, and that leaves them coming back for more.”
–With assistance from Lucas Shaw, Edwin Chan and Brandon Mioduszewski.
(Updates with call details and analyst shares.)
Bloomberg Businessweek Most Read
©2024 Bloomberg LP
