Paramount Shares Fall 8% After Skydance Merger Terminated

Paramount Global

Paramount Global (NASDAQ:PARA) shares plummeted nearly 8% on Tuesday after Shari Redstone, who controls Paramount through her family’s holding company National Amusements, halted merger discussions with Skydance Media. NAI confirmed this decision in a statement.

The Wall Street Journal initially reported the news, indicating that Redstone might now focus on selling NAI rather than merging Paramount with another company. Hollywood producer Steven Paul and media executive Edgar Bronfman Jr. have shown interest in NAI.

This move surprised many, as an independent special committee of Paramount’s board had recently endorsed the Skydance deal’s economic merits after extensive negotiations. The committee was scheduled to vote on the merger on Tuesday afternoon.

National Amusements stated it couldn’t “reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI.” Despite the failed merger, NAI expressed gratitude for Skydance’s efforts and highlighted the continued successful collaboration between Paramount and Skydance. Paramount declined to comment.

Other potential bidders for Paramount included Sony Pictures Entertainment, Apollo Global Management, Warner Bros. Discovery (NASDAQ:WBD), and media mogul Byron Allen. (Disclosure: Yahoo Finance is owned by Apollo.)

Reports suggested Shari Redstone had consistently preferred the Skydance deal over other offers. Skydance, known for producing popular films like “Mission Impossible,” “Top Gun: Maverick,” and “Transformers,” had revised its proposal multiple times, ultimately valuing the deal at $8 billion. This included Shari Redstone selling NAI’s controlling stake in Paramount for about $2 billion. National Amusements owns around 10% of Paramount’s equity and 77% of voting shares.

Backed by private equity firms RedBird Capital and KKR, Skydance planned to merge its studio business with Paramount, valuing the legacy media company at just under $5 billion. Skydance also proposed a $1.5 billion cash injection to help reduce Paramount’s debt.

Skydance’s offer included purchasing half of Paramount’s nonvoting shares for $4.5 billion, or about $15 per share. Nonvoting shareholders could cash out half of their stock at this premium, with the rest converting into shares of the newly merged company. Investors in Paramount’s voting stock, aside from the Redstone family, would have received $23 per share, according to Bloomberg.

Amid the merger uncertainty, Paramount announced the departure of CEO Bob Bakish in late April due to conflicts with Redstone over the Skydance deal. He was replaced by a consortium of three division heads forming the “Office of the CEO.”

At the company’s recent annual shareholder meeting, executives unveiled a plan to cut $500 million in costs, including layoffs and potential asset sales. Co-CEO Chris McCarthy stated, “We all agree that Paramount is not where we want it to be,” emphasizing the value in their assets and the potential for unlocking significant value. Co-CEO George Cheeks added that the cost reductions are a major step toward long-term sustainable growth, with more announcements expected in August.

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