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Skydance and Shari Redstone’s holding company is offering a $3 billion investment in Paramount to win support for a complex merger that has frustrated investors and led to the departure of the Hollywood group’s CEO.
The offer, which includes $2 billion in cash to common shareholders, came as Paramount chief Bob Bakish resigned on Monday, raising new questions about the future of the Hollywood group behind it The Godfather.
Redstone said Monday: “The board and I thank Bob for his many contributions throughout his long career.” . We wish him all the best.”
The Redstone and Paramount boards, which she chairs, have been trying to agree on a deal to merge the company with David Ellison’s Skydance, the production company backed by his billionaire father Larry Ellison, as well as RedBird Capital and KKR.
Under the latest deal terms, Skydance would buy Redstone’s National Amusements for less than $2 billion, not as much as previously discussed between the two sides, people briefed on the matter said.
These people added that Paramount would then merge with Skydance, valuing Ellison’s company at around $5 billion in an all-stock deal. The merger would value Paramount’s existing common stock approximately 30 percent above the current market price.
The Ellison-led consortium will also invest an additional $3 billion in the combined company, the people said. Two-thirds of the investment would be paid to common stock holders in cash through the repurchase of their shares, and the remainder would be used to reduce Paramount’s debt.
Shareholders would have the option to either sell their Paramount shares or retain the combined company’s shares, or a combination of both, as the buyback would be capped at a maximum of $2 billion. Paramount’s Class B common stock currently has a market capitalization of approximately $7 billion.
Paramount has a dual share structure. Redstone’s NAI controls almost 80 percent of the voting rights, but only holds 10 percent of the equity shares. Many Paramount shareholders balked at a previously proposed merger structure that they said would benefit Redstone at the expense of common shareholders.
Redstone would remain an investor in the combined Paramount-Skydance company, a move intended to reflect her belief that the Ellison-led group would reverse the fortunes of Paramount, which has struggled to compete with larger competitors like Netflix to compete with expensive “streaming war”.
“There will be more agreement between them [Redstone’s] interest and shareholders than before,” said a person familiar with the agreement.
Paramount’s board has appointed a special committee to evaluate the plan.
Paramount said Monday that a team of three executives – George Cheeks, Chris McCarthy and Brian Robbins – will replace Bakish and establish an “office of the CEO.”
Bakish, who worked for the company and its predecessor Viacom for a quarter-century, had previously been an ally of Redstone, who promoted him to Viacom CEO in 2016. But their relationship has deteriorated in recent months, according to several people familiar with the matter.
Bakish received a total of $31.5 million in 2023, according to a regulatory filing.
Private equity group Apollo, in collaboration with rival studio Sony, is also preparing to make an offer for Paramount as early as this week, according to people familiar with the situation. Paramount recently rejected Apollo’s $26 billion cash offer, and four members of Paramount’s board have since withdrawn their names for re-election in June.
Paramount on Monday reported a net loss of $554 million on first-quarter revenue of $7.7 billion. The company did not answer questions on its conference call, which lasted less than 10 minutes.
“There’s no sugarcoating this – it looks like a car crash with clear divisions between key stakeholders,” said PP Insights analyst Paolo Pescatore.
“The latest chapter in this ongoing saga appears to be taking another turn for the worse.”