Shari Redstone, president of National Amusements and Vice Chairman, CBS and Viacom speaks at the WSJTECH live conference in Laguna Beach, Calif., Oct. 21, 2019. (REUTERS/ Mike Blake) (REUTERS /
Paramount Global (PARA) shares dropped nearly 8% on Tuesday following the termination of merger discussions between Shari Redstone, the controlling force behind Paramount through National Amusements (NAI), and Skydance Media. This decision was confirmed in a statement by NAI.
The Wall Street Journal first broke the news, noting that Redstone is now considering selling just NAI rather than merging Paramount with another company. Hollywood producer Steven Paul and media executive Edgar Bronfman Jr. have shown interest in the potential sale.
Paramount Board’s Recommendation Overruled
This development is unexpected as an independent special committee of Paramount’s board had recently recommended proceeding with the Skydance deal after extensive negotiations. The committee was expected to vote on the merger on Tuesday afternoon, as reported by the Journal.
In response to the halted talks, NAI expressed appreciation for Skydance’s efforts but stated that they could not agree on mutually acceptable terms. They reaffirmed their commitment to ongoing collaborations between Paramount and Skydance and emphasized their focus on creating value for all Paramount shareholders. Paramount declined to comment on the situation.
Other parties interested in Paramount include Sony Pictures Entertainment, private equity firm Apollo Global Management, Warner Bros. Discovery, and media mogul Byron Allen. Notably, Shari Redstone had consistently preferred the Skydance deal over other offers.
Revised Skydance Offer Rejected
Skydance has a history of successful collaborations with Paramount, producing popular franchises like “Mission Impossible,” “Top Gun: Maverick,” and “Transformers.” The company revised its initial $5 billion offer to a sweeter $8 billion deal, including the acquisition of NAI’s controlling stake in Paramount for around $2 billion, according to CNBC. NAI owns about 10% of Paramount’s equity and 77% of its voting shares.
The proposed deal also included a merger of Skydance’s studio business with Paramount’s, valuing the latter at just under $5 billion. Additionally, Skydance and its affiliates offered a $1.5 billion cash injection to reduce Paramount’s debt.
Shari Redstone, President of National Amusements and Vice Chairman of CBS and Viacom, spoke at the WSJTECH live conference in 2019. Her preferred deal with Skydance would have allowed nonvoting shareholders to cash out half of their stock at $15 per share, with the rest converting into shares of the newly merged entity. A separate Bloomberg report indicated that voting shareholders, excluding the Redstone family, would have received $23 per share.
Management Shakeup and Cost-Cutting Measures
Amid the merger negotiations, Paramount announced in late April the departure of CEO Bob Bakish, who reportedly clashed with Redstone over the Skydance deal. He was replaced by an “Office of the CEO” consisting of three division heads.
At Paramount’s recent annual shareholder meeting, the executives outlined plans to cut $500 million in costs, including layoffs, and explore asset sales and streaming joint ventures with competitors.
“We recognize Paramount is not where we want it to be,” said co-CEO Chris McCarthy. “With our strong assets and people, we believe there’s significant value to unlock.”
The management team is prepared for swift cost reductions, stating that the $500 million savings is “just the beginning,” with more announcements expected in August, depending on potential sale outcomes.
“We’re confident in our ability to operate more efficiently in today’s environment,” added co-CEO George Cheeks, highlighting the need to streamline real estate, technology, and marketing functions. “These reductions are crucial for positioning Paramount for long-term sustainable growth.”
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