Paramount Global and Skydance Media are in talks to merge and buy out controlling shareholder Shari Redstone in a deal worth around $5 billion. Skydance CEO David Ellison and private equity firms KKR and RedBird Capital Partners plan to raise $4.5 to $5 billion in new equity for the deal, with a portion going towards paying off Redstone and reducing debt. The companies hope to finalize the deal in May, with Ellison slated to become CEO of Paramount Global and former NBCUniversal CEO Jeff Shell as president. The special committee at Paramount Global has been slow in providing data during due diligence, slightly delaying the process.
Separately, private equity firm Apollo Global Management and Sony have also discussed a possible deal to buy out all Paramount Global shareholders at a premium. However, the special committee favored Skydance’s offer over Apollo’s as it offered more future upside by keeping the company public with a cleaner balance sheet. Paramount Global’s renewal agreement with Charter Communications for CBS and its cable networks remains a significant hurdle, as the value of the company could be impacted if Charter makes changes to the deal. This agreement deadline is April 30, just ahead of Paramount Global’s first-quarter earnings report on April 29.
Paramount Global’s traditional TV business remains a core revenue driver, with two-thirds of the company’s total revenue coming from this segment. Negotiations with Charter could prove challenging, as seen last year when the cable provider briefly stopped carrying Disney’s networks during renewal talks. Paramount’s cable networks are not as popular as Disney’s ESPN, potentially weakening Bakish’s negotiating position. The deal with Charter comes at a crucial time, as Bakish, who opposes the Skydance deal due to concerns about diluting common shareholders, would still be in control of Paramount Global’s fate during these negotiations.
Bakish has a history of successfully reaching renewal deals with major pay-TV distributors since taking over as CEO. Despite his private reservations about the Skydance deal, he has publicly stated that Paramount is always seeking ways to create value for all shareholders. Some Paramount Global investors have expressed concerns about the deal, arguing that it gives Redstone a significant premium for her controlling shares while leaving common shareholders at a disadvantage. Under the terms of the proposed deal, nearly 50% of the company would be owned by Skydance and its private equity partners, with the rest owned by common shareholders.
The exclusivity window on merger talks with Skydance is set to end on May 3, with the possibility of an extension by two weeks. The negotiations are centered around valuing Skydance’s assets, determining the amount of equity to be added to the merged company, and clearing debt. The potential deal would see Skydance merged with Paramount Global, with Ellison taking the helm as CEO and Shell as president, while current Paramount CEO Bob Bakish would exit the company. The outcome of the discussions with Skydance and Charter Communications will play a significant role in shaping Paramount Global’s future direction and strategy in the evolving media landscape.
