Time is running out for Paramount Global and Skydance Media to reach a deal combining their entertainment empires within the 30-day exclusive negotiating window that closes Friday, and it seems likely that the week will pass without an agreement on a transaction.
Paramount, controlled by Shari Redstone, and Skydance, backed by film producer David Ellison, have been trying to strike a complicated deal that would give Ellison control of the legendary media giant. And so far no agreement has been reached.
What long looked like Paramount Global’s most viable buyout option has been the subject of weeks of palace intrigue, plagued by investor revolt and corporate upheaval. Shares of Paramount fell about 7% on Friday on reports that the company was getting cold feet over Skydance’s offer.
Read more: Sony and Apollo formally make joint $26 billion bid for Paramount
New York-based research firm LightShed Partners said Friday it expects the negotiating deadline to come without an agreement, with a new offer from Sony Pictures Entertainment and Apollo Global Management on deck. The negotiation period is unlikely to be extended, leaving the door open to other options.
The Times has contacted Paramount Global for comment. A spokesman for Paramount’s mergers and acquisitions committee declined to comment.
The Skydance Scenario
Since reports surfaced in January that Ellison’s Skydance was exploring an all-cash deal to acquire National Amusements Inc. to take over – the company that owns 77% of Paramount Global’s voting stock – things have gotten messy.
Over the past month, Paramount has been negotiating with Skydance, which has joined with investment firms RedBird Capital and KKR, to acquire National Amusements, which would give it control of Paramount, owner of the Melrose Avenue film studio Paramount Pictures, a broadcast network. CBS and cable channels MTV and Nickelodeon.
The talks sparked a revolt led by Paramount Global investors, who expressed concern that the deal on the table would largely benefit Paramount’s non-executive chairman, Redstone, at the expense of regular shareholders.
Read more: David Ellison’s Skydance is exploring a possible merger with Paramount through National Amusements
The investor revolt caused Paramount’s stock to plummet and several of the company’s directors to resign. In an effort to quell the backlash, Skydance recently increased its offer with a cash infusion for Paramount and by setting aside funds specifically for Paramount’s non-voting shareholders, which would likely reduce Redstone’s returns.
All this corporate turmoil culminated Monday in the resignation of Paramount Global Chief Executive Bob Bakish, whose opposition to the Skydance deal did not sit well with Redstone.
Bakish favored another suitor of Paramount Global, private equity firm Apollo Global Management, which this week joined forces with Sony Pictures Entertainment to make a $26 billion cash bid for the entertainment empire.
Sony-Apollo floats around the hoop
As this Paramount-Skydance saga unfolds, Apollo and Sony have officially entered the ring as a team.
Culver City-based Sony has offered to become majority owner of the entertainment company, with Apollo as minority owner.
Read more: Sony is in talks with Apollo to make a bid for Paramount
Because Sony Corp. is based in Tokyo, Apollo would likely have to take control of Paramount’s CBS network to comply with Federal Communications Commission rules limiting foreign ownership of television stations — a technicality that makes the offer less attractive for a company could make. According to LightShed analysts, the company is reluctant to divide its assets.
Such a deal, although from a financial perspective, would cause unrest in Hollywood. It would likely lead to massive layoffs, reducing the number of major movie studios from five to four.
What if none of the above?
After Bakish was ousted, Paramount Global appointed three of its top entertainment executives – Paramount Pictures CEO Brian Robbins, CBS’s George Cheeks, and Showtime/MTV Entertainment Studios head Chris McCarthy – to run the company in the capacity of ‘office of the CEO’.
If a merger between Paramount and Skydance does not materialize, analysts at LightShed Partners predict that Paramount will move forward with its leadership trifecta, focus on restructuring its operations and ultimately rethink its mergers and acquisitions discourse later this year or in 2025. The regulatory landscape is expected to change more markedly after the 2024 presidential elections.
The LightShed analysts said they doubt Paramount will immediately move on to a Sony-Apollo deal in the event that talks with Skydance fail.
Read more: Bob Bakish is ousted as CEO of Paramount Global as internal strife explodes in public opinion
“We’re only four days into the trip, so I can’t say much,” Cheeks wrote in a memo to Paramount Global staff. “But… Brian, Chris and I are finalizing our strategic plan that we are going to roll out as quickly as possible.”
Times writers Samantha Masunaga and Meg James contributed to this report.
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This story originally appeared in the Los Angeles Times.
