Wednesday, June 19, 2024

Redstone Ends Discussions With Skydance Media Over Merger

(Bloomberg) — Paramount Global Chair Shari Redstone has walked away from an offer 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 run atop the owner of CBS and MTV.

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A special committee of the board met on Tuesday to discuss a complicated deal proposed by Ellison, which would have seen Redstone sell him her family’s National Amusements Inc., the holding company that controls 77% of the Paramount voting stock. But before the meeting was over, representatives for Redstone informed the committee that NAI had not come to a deal with Skydance, a dramatic reversal considering Redstone’s initial support.

Redstone had pushed for a merger of Paramount with Skydance over other potential deals, pursuing a transaction 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 that prompted Ellison to revise his offer.

Ellison changed the terms in an effort to appease everyone — not only the Redstones but also Paramount shareholders who balked at a deal that paid the Redstones a premium and diluted other investors. Ellison threw in more money for shareholders and cash to pay down debt, and also offered to help cover potential legal costs. Redstone was sued following the Viacom-CBS merger and was wary of being sued again for the Ellison deal.

Redstone will now pursue a sale of National Amusements alone, rather than attempting to merge Paramount with another company, people familiar with the discussions said, asking not to be identified discussing non-public information.

“NAI is grateful to Skydance for their months of work in pursuing this potential transaction and looks forward to the ongoing, successful production collaboration between Paramount and Skydance,” National Amusements said in a statement.

The Wall Street Journal earlier reported on the end of the discussions.

Paramount shares tumbled about 8% on the news, ending the day at $11.04, as investors braced for another period of negotiations and uncertainty. While shareholders had initially resisted Ellison’s deal, they had warmed to his revised terms.

Ellison, the son of Oracle Corp. co-founder Larry Ellison, has been pursuing 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 shares have lost more than half of their value since the Redstones recombined CBS Corp. and Viacom Inc. in 2019 to create Paramount Global.

The Redstones have been considering a sale as the business faces steep challenges. Laden with more than $14 billion in debt, the company has struggled to compete in streaming and has suffered as cable TV audiences canceled their subscriptions and abandoned traditional channels like CBS and Nickelodeon. Its namesake studio has struggled to make money. New owners and additional capital could provide the beleaguered Paramount with a fresh start.

Redstone, 70, has received interest from at least five potential suitors for the storied film and TV company, including Sony Group Corp. and Apollo Global Management Inc., which proposed a $26 billion deal. But that offer, which would have involved a foreign owner and the consolidation potentially of two large Hollywood studios, was seen as problematic and likely to face tough regulatory scrutiny.

Hollywood film producer Steven Paul has assembled an investment group that includes the billionaire co-founder of Patrón tequila and made an offer more than 10% above Ellison’s. Media mogul Edgar Bronfman, backed by private equity firm Bain Capital, also expressed interest with a $2 billion-plus offer.

As part of the transaction Ellison proposed, he and his partners, including RedBird Capital Partners and KKR & Co., would have bought National Amusements for $2.25 billion and injected $1.5 billion into the balance sheet to pay down some of Paramount’s debt.

The Ellison group would have contributed $4.5 billion in additional money to purchase Paramount shares. Up to 50% of Paramount’s Class B non-voting shareholders would receive $15 a share and all of the non-Redstone family Class A shareholders would receive $23 a share, according to people familiar with the discussions, who asked not to be identified discussing information that’s not public.

The rest of the shares would roll over into 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 background on the deal negotiations.)

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