Paramount Global to merge with Skydance Media (2024)

Paramount Global parent National Amusem*nts and Skydance Media have agreed to merge less than a month after the sides abruptlyended deal talks.

Paramount, owner of Paramount Pictures movie and television studios, the CBS television network and CBS News, announced in a news release late Sunday that it is combining with Skydance, an entertainment business founded by David Ellison, son of Oracle founder Larry Ellison. Paramount also owns the Paramount+ streaming service, Nickelodeon, BET, MTV, Comedy Central and other media brands.

The transaction resolves months of speculation around the future of Paramount, which also reportedly attracted a $26 billion bid from a consortium including Sony Pictures and private equity firm Apollo Global Management. A range of prominent media and entertainment industry executives were also said to have expressed interest in a possible deal for Paramount.

Under the two-step deal, Skydance will first pay $2.4 billion for National Amusem*nts, which controls 77% of the voting shares of Paramount. Shareholders with non-voting stock will receive $15 per share, or one share of non-voting stock in the new company.

Class A shareholders other than National Amusem*nts will receive $23 per share, or the right to get 1.5333 non-voting shares in the merged company. Paramount Global would then merge with Skydance in an all-stock transaction that values the latter at $4.75 billion.

The deal also gives other potential bidders for Paramount 45 days to submit a competing offer, an apparent effort to appease shareholders who felt Skydance's initial bid undervalued their stake in the media company. The transaction is subject to regulatory approval.

Uniting old and new Hollywood

The deal unites Paramount — a storied movie studio dating back to 1912 that is known for film classics such as "Titanic," "The Godfather" and "Raiders of the Lost Ark," as well as franchises including "Star Trek" and "Mission Impossible" — with a relative newcomer to the entertainment industry. Since David Ellison launched Skydance in 2010, the company has produced or co-produced hit films and TV shows including "Top Gun: Maverick" and the "Reacher" streaming series.

"This is a defining and transformative time for our industry and the storytellers, content creators and financial stakeholders who are invested in the Paramount legacy and the longevity of the entertainment economy," Ellison said in a statement. "I am incredibly grateful to Shari Redstone and her family who have agreed to entrust us with the opportunity to lead Paramount. We are committed to energizing the business and bolstering Paramount with contemporary technology, new leadership and a creative discipline that aims to enrich generations to come."

Ellison will serve as chairman and CEO of Paramount, and Jeff Shell, chairman of RedBird Sports and Media, a unit of investment firm RedBird Capital Partners, will become president. Shell is the former CEO of NBCUniversal.

Redstone's final act

For Shari Redstone, the controlling shareholder in National Amusem*nts, the deal brings to a close her family's long stewardship of Paramount, which was built on the foundation laid by her late father, entertainment mogul Sumner Redstone. In recent years, that effort has focused on growing Paramount's streaming footprint, along with the continued expansion of its core network TV, cable and movie businesses.

"In 1987, my father, Sumner Redstone, acquired Viacom and began assembling and growing the businesses today known as Paramount Global," Redstone said in a statement. "He had a vision that 'content was king' and was always committed to delivering great content for all audiences around the world. That vision has remained at the core of Paramount's success and our accomplishments are a direct result of the incredibly talented, creative and dedicated individuals who work at the company. Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king."

The merger with Skydance follows what has been a fraught negotiation in which Paramount executives sought to balance the interests of investors who own the company's voting shares — which are primarily controlled by Redstone — and investors with non-voting stock. The latter are represented by large institutional investors such as Berkshire Hathaway and Vanguard, according to financial data firm FactSet.

The deal also follows theApril 29 departureof former Paramount Global CEO Bob Bakish, who was replaced by an Office of the CEO led by three division chiefs: George Cheeks, president and CEO of CBS; Chris McCarthy, president and CEO of Showtime and MTV Entertainment Studios; and Brian Robbins, president and CEO of Paramount Pictures and Nickelodeon.

Targeting major cost cuts

After the initial deal to combine National Amusem*nts and Skydance collapsed on June 11, Paramount leaders disclosed plans to cut costs by $500 million, explore a joint venture or other possible partnerships for Paramount+, and sell non-core assets. It is uncertain how that blueprint could change under Skydance's watch.

In a call with Wall Street analysts on Monday to discuss Paramount's future, Shell said RedBird and Skydance had identified roughly $2 billion in potential cost savings.

In its most recent quarter, Paramountreportedan operating loss of $417 million on revenue of $7.6 billion, compared with a loss of $1.2 billion on revenue of $7.2 billion in the year-ago period. Skydance, which is privately held, expects its annual revenue to reach $1 billion in 2024, according to The Wall Street Journal.

The sale of Paramount also highlights ongoing consolidation within the media space as industry stalwarts like Paramount and CBS seek to compete with much larger competitors, including technology and entertainment companies.

"We think the new company has major opportunities for content production and distribution, but the challenges of competing in today's disruptive movies and entertainment industry remain," Kenneth Leon, an analyst with CFRA Research, said in a report.

In:
• Paramount+
• Skydance Media
• Comedy Central
• Paramount
• MTV
• CBS
• Showtime