Skydance, Paramount Appear Ready to Announce Merger Deal After Ellison Improves Offer
Skydance juiced the amount of money non-voting shareholders would get for their Paramount stock in its latest proposal.
Just when Skydance thought it was out, Paramount pulled the production company back in. According to The Wall Street Journal, merger and acquisition talks between the two sides reignited last week after Skydance sweetened its offer to provide substantial compensation for non-voting shareholders. Now, CNBC’s David Faber reports that Skydance is ready to announce that it will take over the entertainment conglomerate.
Key Details:
- Skydance improved its offer to include a purchase of some non-voting shares for $15 each, a 26% premium over the stock’s current value.
- Paramount’s special M&A committee has officially endorsed the deal ahead of the annual shareholders meeting.
- **The Skydance offer would keep Paramount as one cohesive company, as opposed to the Sony/Apollo bid.
There was quite a bit of movement on the Paramount and Skydance front over the weekend, and now Faber reports that Skydance is “poised to announce” a takeover of the company. If true, it would mean that barring legal action from Paramount shareholders, the legacy media firm is about to change hands, in a move that will send ripple effects throughout Hollywood.
Skydance’s latest offer for Paramount includes a provision that would allow non-voting shareholders to sell their Paramount stock for $15 per share, a 26% premium over the stock’s current market price. Non-voting shareholders felt left out in the cold by Skydance’s first offer, which provided a cash buyout for Paramount’s controlling shareholder Shari Redstone, and saw Paramount acquired by Skydance in an all-stock deal.
The special committee established by Paramount to consider M&A opportunities has given its seal of approval to the deal, and company officials will present the terms on Tuesday at the company’s annual shareholders meeting. It’s unclear if the latest offer from Skydance and its owner David Ellison will mollify Paramount stakeholders; some threatened to sue if Redstone tried to move ahead with the initial Skydance offer, but that was before Skydance proposed several updated deals.
All throughout the sale process, Redstone has preferred the Skydance offer because it would keep Paramount as a single company, instead of breaking it down and stripping it for parts. The two sides entered into an exclusive negotiating period in April, with many analysts believing a deal was soon to follow. But as more shareholders made their objections to the deal known, Redstone decided she did not want an ugly fight trying to ram a deal through, and pivoted to a $26 billion all-cash offer from Sony and its private equity partner Apollo Global Management.
Sony, Apollo, and Paramount are still talking, and recently signed the non-disclosure agreements necessary to get a detailed look at each other’s books. But various regulatory problems would almost certainly cause Sony to sell off big chunks of Paramount if it became the company’s new owner and Redstone reportedly wants to keep the company that her father built together, if possible.
How Would Paramount/Skydance Deal Proceed?
The current Skydance offer is a two-step process. The company would buy National Amusements Inc., Redstone’s holding company through which she controls 77% of Paramount’s voting stock. After a $1.5 billion cash infusion, Paramount would acquire Skydance, and merge the two companies into one.
Paramount is mulling the possibility of building a “go-shop” provision into the deal, which the WSJ reports would allow Redstone to skip the process of polling other shareholders for approval. Paramount would take the deal to competitors for a limited period and see if they could make a better offer.
The New York Times reports that one major sticking point still to be ironed out is who would represent Paramount if one of its shareholders decided to sue over the deal. National Amusements wants Skydance to assume that responsibility, but the two sides have not agreed on the point as of yet.
Paramount has been fighting the same headwinds that are hindering every other major entertainment company in Hollywood to varying degrees these days. Its broadcast and cable channels have long been the company’s top revenue driver, but cord-cutting and declines in the ad market combined with the slow rise of the Paramount+ and Pluto TV streaming services has left Paramount in a financial bind.
The WSJ reports that two unnamed parties have approached Redstone about taking over control of National Amusements if the Skydance talks fall through. Ellison and his company appear to have a sincere, continued interest in acquiring Paramount, but the process could still hinge on the actions of shareholders who are still leery of the offer.
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