Skydance Reaches Deal to Merge With Paramount

Skydance Reaches Deal to Merge With Paramount - The New York Times

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Paramount Agrees to Merge With Skydance

The deal, approved by Paramount’s board, ushers in a new chapter for the company, which owns CBS and the movie studio behind “Top Gun.”

Paramount’s board on Sunday signed off on a deal to merge with Skydance, according to two people familiar with the negotiations, ushering in a new era for CBS, Nickelodeon and the film studio behind the “Top Gun” and “Mission: Impossible” franchises.

The deal is a turning point for the Redstone family, whose fortunes have been intertwined with the rise and fall of the traditional entertainment industry during the decades of its tumultuous ownership of Paramount and its predecessors. Ms. Redstone, Paramount’s board chair, is cashing in much of her ownership in the company she fought to preserve and control.

The merger will anoint a new mogul in Hollywood. David Ellison, the tech scion behind Skydance, will become the top power broker at Paramount. The deal is in some ways the story of media writ large, with a family that made its fortune in traditional entertainment largely replaced by one enriched by technology — Mr. Ellison is the son of the Oracle founder Larry Ellison. The Ellisons’ considerable resources was a major selling point for the Redstones, who were seeking to fortify Paramount for the long-term.

In recent years, Paramount has become the poster child of a traditional media industry that has been limping along in the shadows of the streaming giant Netflix and tech companies like Amazon, which have plenty of cash to spend on their media bets. Paramount has tried to replace its fading cable TV enterprise with streaming businesses like Paramount+, but those efforts are still nowhere near as profitable as traditional TV operations.

The full value of the merger was not immediately clear because the deal is complex. Skydance and its financial backers will acquire National Amusements, the company that holds the Redstone family’s voting stock in Paramount, for roughly $1.75 billion. Paramount is also merging with Skydance, leaving the studio and its backers in charge of a media empire that includes film, TV and news properties.

Paramount’s market capitalization — the value the stock market places on the company — is around $8.2 billion. Skydance’s last disclosed valuation was north of $4 billion.

A tender offer from Skydance will allow many holders of Paramount’s nonvoting stock to cash out at roughly $15 per share. Investors who own voting stock will be able to sell at $23 per share. This will allow investors who feel shortchanged by the Skydance deal — there are many — to get rid of the company’s stock at a premium to its current price of $11.81.

The merger with Skydance closes a chapter for Ms. Redstone, 70, who took over from her father, Sumner, and fought to keep the family media empire intact.

Skydance’s takeover of Paramount has been a drama worthy of a summer blockbuster. Since the beginning of the year, Ms. Redstone, Paramount and Mr. Ellison have been in engaged in semipublic negotiations that frequently leaked to the press and curdled the good will on both sides.

Executives appeared to be close to a deal last month. But the renegotiated terms reduced the value of Ms. Redstone’s controlling stake. Just as a special committee of Paramount’s board was preparing to make it official, Ms. Redstone’s lawyers emailed them to kill the deal, saying they couldn’t agree on “noneconomic terms.”

With the deal on ice, other suitors emerged to court Ms. Redstone, including the billionaire Barry Diller and Steven Paul, the producer best known for the “Baby Geniuses” movie franchise. But the Skydance deal came back last week, with Skydance improving its offer for Ms. Redstone’s stake and offering firmer protections against litigation.

Those provisions may help reduce the challenge posed by investors who have opposed the deals with Skydance, saying they would enrich Ms. Redstone at the expense of other shareholders. All the Skydance merger deals that have been considered have guaranteed her an extra payout in exchange for her voting clout — typically called a control premium — which some shareholders have argued is unfair. A small number have threatened to sue.

The merger comes at a precarious time for Paramount. Its flagship streaming service, Paramount+, is hemorrhaging hundreds of millions of dollars in cash annually. After clashing with Ms. Redstone, its chief executive, Bob Bakish, was replaced by three executives, who run an “office of the C.E.O.” — an awkward, temporary fix. And its cable business is in long-term decline, causing its stock to slide more than 70 percent over the last five years.

In the last month, Paramount’s three chief executives have proposed a plan they say will help get Paramount back on track that includes cutting $500 million in costs and selling off parts of the company that aren’t central to its strategy. Losses are beginning to slow at Paramount+, and the company is exploring a potential joint venture with other firms that could reduce costs further.

The man who will take control of the flagging company is a Hollywood producer and executive who has helped fund some of Paramount’s biggest franchises. After dropping out of the University of Southern California to try his hand at acting, Mr. Ellison began to finance films, founding Skydance in 2010. The company has produced some of its most successful movies with Paramount, including “Top Gun: Maverick” and “Mission: Impossible — Dead Reckoning Part One.”

Mr. Ellison, 41, is planning to bring his own cast into Paramount. Jeff Shell, a former chief executive of NBCUniversal, has been in discussions to take a major role, two people familiar with the matter said. He was fired from NBCUniversal last year after an anchor at CNBC lodged a sexual harassment complaint against him. Late last year, he joined RedBird Capital Partners, a Skydance backer, as its chairman of sports and media.

Mr. Bakish, 60, remains an adviser to Paramount. His exit agreement, which was filed in May, says he will continue to work for the company through October with a monthly salary of $258,333 and benefits. His exit package also includes a two-year nondisparagement agreement.

Though Mr. Ellison hasn’t spoken publicly about his plans for Paramount, he has briefed its board on his intentions, two people familiar with the matter said. Mr. Ellison has discussed the possibility of teaming up with one or more of Paramount’s rivals on a combined streaming service. He also plans to turbocharge the company’s technology, adding better personalization features to its streaming service.

Another pillar of Skydance’s plans for Paramount is cost cutting. The company plans to consolidate some international operations, boosting profits partly by laying off employees. That won’t earn Mr. Ellison many fans among the company’s rank-and-file, though it could help him please shareholders.

Benjamin Mullin reports on the major companies behind news and entertainment. Contact Ben securely on Signal at +1 530-961-3223 or email at benjamin.mullin@nytimes.com. More about Benjamin Mullin

Lauren Hirsch joined The Times from CNBC in 2020, covering deals and the biggest stories on Wall Street. More about Lauren Hirsch
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Inside the Media Industry

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Paramount: ​​A special committee of Paramount’s board
signed off on a deal to merge with Skydance, according to two people familiar with the negotiations.
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Netflix and Amazon: The two studios are
driving a small bump in the market for TV shows after a major slowdown, greenlighting even more scripted projects.
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USA Today: ​​Terence Samuel, the newspaper’s editor in chief,
is leaving the role after a year, sharing that his departure was “sudden” but that he could not talk about why he was stepping down.
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Fox News: President Biden’s son Hunter Biden
sued the network, arguing that a mini-series it produced broke the law by sharing explicit photos and videos of him without his permission.
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The Washington Post: ​​Robert Winnett, the editor selected to run the paper following Sally Buzbee’s resignation,
will not take up that position, after reports raised questions about his ties to unethical news gathering practices in Britain.