Shari Redstone, president of National Amusements, speaks at the WSJ Tech Live conference in Laguna Beach, California, on October 21, 2019.
Mike Blake | Reuters
Skydance Media's bid to acquire National Amusements and merge its studio with Paramount Pictures is not a traditional takeover. Question for Paramount Global Shareholders may ask: Is this better than no agreement at all?
Skydance made a unique offer to Paramount Global's special committee, responsible for approving or rejecting transactions, and its investors, according to four people familiar with the parameters of the offer. Paramount Global will continue to trade publicly. Skydance will acquire either a significant minority stake or a majority stake in Paramount Global by consolidating its assets and raising new shares, which it will acquire with private equity partners RedBird Capital Partners and KKR.
The consortium's ownership percentage in the new company could reach about 45% or just over 50%, said the people, who asked to remain anonymous because the discussions are private. No details have been determined and are all still subject to change, the people said.
Spokespeople for Paramount Global and Skydance declined to comment.
The new shares will be dilutive to existing shareholders. But it will align voting and economic control in a way that has not existed with the Redstone family, which currently directly or indirectly owns 77% of Paramount Global's Class A voting stock and 5.2% of its Class B common stock. About 10% of the company's total equity.
While David Ellison is primarily responsible for coordinating the deal, his father, inspiration Co-founder and Chairman Larry Ellison will provide some of the new financing, the people said. It will also likely provide Paramount Global with access to Oracle's AI software and other data technology.
Paramount Global owns many valuable legacy media assets, including CBS, the Paramount Pictures studio and its physical collection, a studio library containing films such as “The Godfather,” “Titanic” and “Forrest Gump,” and cable networks such as Comedy Central and Nickelodeon. It also has a subscription streaming service (Paramount+) with more than 67.5 million subscribers, and a free, ad-supported service (Pluto TV) with more than 80 million monthly active users.
However, it has struggled to grow in recent years. Paramount Global's 2023 annual revenue was $29.7 billion, down 1.7% from 2022. Paramount+ continues to lose money. Paramount Global's debt rating was downgraded to junk by ratings agency Standard & Poor's Global last month because the company's streaming and TV business is declining as traditional pay-TV subscribers cancel.
Paramount Global has a market capitalization of about $7.6 billion and had long-term debt of $14.6 billion at the end of 2023. When CBS and Viacom merged in 2019, the company's combined market capitalization was about $30 billion.
Skydance plan
In the past decade, Oracle has successfully transformed from a legacy enterprise technology company into a cloud services and AI-focused business. This is a similar thematic scheme to what the Ellison family would like to do with Paramount Global – an old media company that needs to look towards the future to justify its existence.
David Ellison will likely lead the new company. Former NBCUniversal CEO Jeff Schell, as Chairman of Sports and Media at RedBird, is also expected to have a key leadership role. Management would be open to divestments that current CEO Bob Bakish examined but ultimately rejected, such as selling BET Media Group and Showtime, the sources said.
The new leadership will also evaluate more existential questions for Paramount Global, such as the future of Paramount+ and what role the company should play in the broader media ecosystem. No decisions have been made yet on those larger strategies, the people said.
better than nothing
The transaction as proposed is not a full acquisition of Paramount Global. The people said that was what Paramount Global's board preferred, but Ellison rejected that.
However, the message to investors is that the combination of David Ellison, his father's involvement, Shell, Skydance's assets, and its commitment to new media (including Skydance's video game development studio) is simply better for future growth than Redstone and Bakish.
Paramount Global's special committee will need to decide whether the complex Skydance deal is better than the status quo — and also better than any other offer that might come along. The sources said that the two sides have entered into exclusive talks to conduct deeper due diligence and perhaps reach an agreement in the next month or two.
There could still be other routes to follow. Private equity firm Apollo Global Management The Wall Street Journal reported this week that Redstone recently mobilized a $26 billion bid for the entire company, but Redstone chose to move forward with Skydance talks exclusively. Redstone has informally sought a buyer for Paramount Global for years, according to people familiar with the matter. Apollo's late offer may be an attempt to keep the private equity firm in good stead if the Skydance deal falls through.
Warner Bros. Discovery It had initial discussions with Paramount Global but stopped working on a deal earlier this year, CNBC reported in February.
Watch: Faber Report: Paramount Global deal moves to fast track
Disclosure: NBCUniversal is the parent company of CNBC.
