Skydance’s David Ellison nearing deal for Paramount after sweetened offer
David Ellison’s Skydance Media is close to clearing a major hurdle in its pursuit of Paramount Global.
The media giant’s committee of independent board members has signaled its approval for Ellison’s takeover of the storied company, according to four people familiar with the situation who were not authorized to comment.
Formal approval by Paramount’s special committee could come as early as Monday, one of the knowledgeable people said.
However, the Skydance deal is not entirely stitched up. The arrangement still lacks the consent of Paramount’s controlling shareholder, Shari Redstone, sources said. Her support is key for any deal to move forward.
Shares of Paramount Global were down as much as 7% Wednesday as several directors are leaving the company’s board and talks with Skydance continue.
Representatives for Paramount were not immediately available to comment.
Redstone’s family owns 77% of the controlling shares of Paramount Global through its holding company National Amusements Inc., giving the heirs of Sumner Redstone enormous sway over the future of the struggling owner of Paramount Pictures, the CBS broadcast network, Comedy Central, MTV and Nickelodeon.
Complicating matters, as the Skydance sale process has dragged on, Redstone has fielded interest from at least two other interested buyers for National Amusements.
Late last week, Redstone was said to be mulling those offers, including one that was said to be higher than what Skydance and its partners had offered the Redstones. The Skydance proposal would give the Redstone family more than $2 billion for National Amusements, including money to pay off its debts, and its voting shares in Paramount. The family would come away with about $1.8 billion, one of the sources said.
Redstone has long preferred the Skydance proposal because it would keep intact the media company that her father spent decades building into a behemoth. Both sides appear optimistic that they are closing in on the finish line, the sources said.
Skydance Media is exploring an all-cash deal to acquire National Amusements, the company that owns the bulk of Paramount Global voting stock, as part of a deal to merge Skydance and Paramount together.
In recent weeks, Redstone urged Skydance and its partners to increase their offer by at least $1 billion, one of the sources said.
Skydance and its backers RedBird Capital Partners and private equity firm KKR have twice increased their offer for Paramount.
In recognition that they needed to pony up more cash, and also win over members of the special committee, Skydance and RedBird agreed last week to sweeten their offer. They proposed setting aside about $4.5 billion to buy out certain A-class and non-voting B-class stockholders at $15 a share during a second phase of the transaction. The parties worked over the weekend to hammer out such provisions.
Paramount B-class shares rose 7.5% to $12.80 on Monday.
The latest Skydance and RedBird offer also includes a $1.5- billion cash infusion to shore up Paramount’s balance sheet and help reduce debt, according to one of the sources.
Further boosting the bid for Paramount, Oracle’s billionaire chairman, Larry Ellison, has agreed to help his son get the deal over the finish line, one of the sources said.
The Skydance group has now turned its attention to securing Redstone’s approval, and the two sides are negotiating over terms, including Redstone’s request that her family be indemnified against huge potential losses resulting from shareholder lawsuits, according to two of the sources.
Skydance Media CEO David Ellison, son of billionaire Larry Ellison, has emerged as a strong contender to take over the iconic Paramount studios.
Paramount’s shareholders have long protested the second phase of the deal, when Ellison intends to fold his company, Skydance, into Paramount.
Skydance Media is a Santa Monica production company that has backed movie and television hits such as “Top Gun: Maverick,” “Star Trek” and “Grace and Frankie.” In recent years, the firm — which has about 1,300 employees — has expanded into animation, sports and gaming.
Two years ago, Skydance secured $400 million in funding, giving Skydance a valuation of more than $4 billion.
Shareholders of Paramount have said that absorbing Skydance would dilute their shares. Nonvoting shareholders have also complained that the Skydance deal would provide a premium to Redstone and her family for their voting shares.
Under the terms of the Skydance proposal, not all Paramount shareholders would be bought out. While the Redstone family would be retired, other shareholders would have the option to tender shares or stay on as investors in Paramount. The thinking is that a percentage of investors would hold onto their shares in a gamble that the Ellison-managed company would perform better than Paramount has in recent years.
The movement in the deal talks comes less than a month after Skydance’s exclusive negotiating window expired — and on the eve of Paramount’s annual meeting with shareholders.
Paramount board members previously agreed to consider a rival $26-billion bid for all outstanding shares and to pay off existing debt from Sony Pictures Entertainment and Apollo Global Management, but those talks lost momentum in recent weeks, knowledgeable people said.
Sony, which has long been known as a cautious buyer, began to lose interest in the Apollo bid, believing it was too expensive, particularly given the struggles of Paramount’s cable channels that still provide the bulk of the company’s operating income. Sony would also face significant regulatory scrutiny due to foreign ownership restrictions, which would prevent it from owning CBS and its TV stations.
One of the company’s strongest assets — the top-ranked CBS network — would have been cleaved off.
Sony’s Tokyo-based parent company hasn’t forgotten how it overpaid for the Sony/Columbia-Tri Star deal decades ago, so the company was leery about a repeat scenario with Paramount, one of the sources said.
Rather than leading Paramount to reclaim its place among industry titans, Redstone’s tenure atop the company has been marred by miscalculations and setbacks.
While many B-class shareholders were enthusiastic about the Sony and Apollo arrangement, Redstone has long opposed aspects of that proposal because it would have led to a breakup of the company and a sale of the Melrose Avenue movie lot.
Some Hollywood film producers and agents also have been rooting for the Skydance bid, believing it represents the best chance to preserve one of Hollywood’s oldest studios, known for such gems as “The Godfather,” “Chinatown,” “Terms of Endearment,” “Top Gun” and “Forrest Gump.”
The Wall Street Journal first reported that Redstone was considering other offers for National Amusements. On Monday, CNBC reported the Skydance deal was close to winning approval.
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