Paramount Worldwide Skydance Media and Skydance Media are making progress on a deal to merge the media companies and acquire controlling shareholder Shari Redstone, people familiar with the matter said.
Paramount Worldwide’s special committee, which is responsible for accepting or rejecting the deal, and David Ellison’s Skydance Media, which is backed by private equity firms KKR and RedBird Capital Partners, are narrowing the scope of how Skydance’s assets will be treated within the merger. Valuation and how much it is worth.
People familiar with the matter said the two sides are close to reaching an agreement on the value of Skydance. They said the entertainment company would be valued at about $5 billion and would merge with Paramount Universal. Skydance CEO Ellison and private equity firms plan to raise about $4.5 billion to $5 billion in new equity, people familiar with the matter said; part of it (about $2 billion) will be used to pay Redstone and the other large part will be used to repay debt.
People familiar with the matter said the buyer’s best hope is to close the deal in May. Paramount Worldwide has been slow to provide data during due diligence to the Skydance consortium, slightly delaying the deal timeline, three of the people said. The exclusivity window for merger talks ends on May 3, but the Skydance consortium wants to extend it by two weeks, people familiar with the matter said.
Skydance plans to name Ellison CEO of Paramount Worldwide and former NBCUniversal CEO Jeff Schell as president, two people familiar with the matter said. Current Paramount CEO Bob Bakish will leave the company, people familiar with the matter said.
Separately, private equity firm Apollo Global Management and Sony have held preliminary discussions about joining forces on a deal that would acquire the shares of all Paramount Worldwide shareholders at a premium, according to people familiar with the matter. The special committee has not received specific details about the offer and does not believe it is a competing offer for Skydance’s interests, two people familiar with the matter said.
The committee nonetheless learned more details about Apollo’s initial offer, but it chose to ignore it in favor of exclusive negotiations with Skydance, a person familiar with the matter said. The special committee favored Skydance’s bid over Apollo’s, in part because it gives shareholders room for future growth by keeping the company public and maintaining a cleaner balance sheet, the person said.
Spokespersons for Apollo, Paramount Worldwide’s special committee, Paramount Worldwide and the Skydance consortium declined to comment.
The last big obstacle
One major hurdle that remains is Paramount Worldwide’s renewal of its agreement with Charter Communications for CBS and its cable networks. The deal is tied to the value of Paramount Universal, which could take a hit if Charter abandons the network or agrees to lower carriage rates, people familiar with the matter said.
The deadline for the agreement is April 30.
Paramount Worldwide still relies on its traditional television business, which accounts for about two-thirds of the company’s total revenue.
There are signs that Charter could emerge as a tough negotiator with Paramount Global: Last year, the second-largest U.S. cable provider briefly said: Stop carrying Disney Network when contract renewal talks between the two companies hit a wall. An agreement was reached 10 days later.
Paramount’s cable network is far less popular than Disney’s ESPN, which could put Bakish in a weak position.
The timing of the renewal and deal negotiations created an awkward situation in which Bakish, who would eventually leave the company following the Skydance merger, would be in control of Paramount Worldwide’s fate with Charter.
To date, Bakish has struck renewal deals with major pay-TV distributors since taking the helm at Viacom in 2016.
Bakish privately opposed the Skydance deal because it diluted common shareholders, people familiar with the matter said. Several Paramount Worldwide investors also publicly wrote to the company’s board, urging directors not to move forward with the Skydance deal, saying it would have created a huge premium for Redstone’s controlling stake while leaving ordinary shareholders out in the cold.
According to a CNBC report on April 5, under the terms of the deal, Skydance and its private equity partners will own nearly 50% of the company.
“At Paramount, we are always looking for ways to create shareholder value. To be clear, this works for all shareholders,” Bakish said During his company’s recent earnings call, In February.
Revealed: Comcast is the parent company of NBCUniversal and CNBC.
About The Author
