According to sources, Paramount Global and Skydance Media are negotiating a merger and the acquisition of controlling shareholder Shari Redstone.
According to CNBC, Paramount Global's special committee, which is in charge of accepting or rejecting transactions, and David Ellison's Skydance Media, which is backed by private equity firms KKR and RedBird Capital Partners, are negotiating how to value Skydance's assets as part of a merger and how much equity to add to the company as part of a recapitalization.
The parties are close to settling on a price for Skydance, according to the sources, who requested not to be identified because the conversations are confidential. The entertainment firm would be valued at around $5. billion and merged with Paramount Global, they said. Skydance CEO Ellison and the private equity companies intend to raise around $4.5 billion to $5 billion in fresh equity, according to the individuals; part of it — about $2 billion — would be used to pay Redstone, while the majority would be used to pay down debt.
According to the sources, the purchasers would want to close the transaction in May. Three individuals claimed Paramount Global was hesitant to deliver data to the Skydance consortium during due diligence, which has put the deal's schedule back slightly. According to the sources, the Skydance consortium wants to prolong the exclusivity period for merger discussions by two weeks.
Skydance plans to According to two sources, Ellison will be named CEO of Paramount Global, with former NBCUniversal CEO Jeff Shell serving as president. The current CEO of Paramount, Bob Bakish, would leave the business, according to sources.
Separately, private equity firm Apollo Global Management and Sony have conducted preliminary talks about collaborating on a plan to buy out all Paramount Global owners at a premium, according to individuals familiar with the subject. According to two sources, the special committee has yet to receive specific details on that offer and does not consider it a competitive bid for Skydance's investment.
Still, the committee had more information on Apollo's original offer, which it opted to reject in favor of exclusive negotiations with Skydance, according to one of the sources. The special committee preferred Skydance's bid over Apollo's in part because it provided shareholders with future upside by keeping the firm public and having a better balance sheet, according to the individual.
Representatives from Apollo, the Paramount Global special committee, Paramount Global, and Skydance's consortium declined to comment. One major impediment remains: Paramount Global's renewal arrangement with Charter Communications for CBS and its cable networks. That agreement has an impact on Paramount Global's value, which may suffer if Charter eliminates the networks or agrees to a reduced carriage charge, according to the sources.
The agreement's deadline is April 30. Paramount Global announces its first-quarter profits one day early, on April 29.
Paramount Global is still reliant on its conventional television business, which accounts for around two-thirds of its entire income.
There are hints Charter might be a difficult negotiator with Paramount Global. When renewal discussions between the two businesses failed last year, the second-largest cable provider in the United States temporarily ceased transmitting Disney's networks. The parties struck an agreement ten days later.
Paramount's cable networks are significantly less popular than Disney's ESPN, which might put Bakish at a disadvantage.
The timing of the renewal and transaction discussions creates an uneasy scenario in which Bakish, who will eventually depart the firm as part of a Skydance merger, will have authority over Paramount Global's relationship with Charter.
Bakish has consistently secured renewal deals with the main pay-TV distributors since taking over as CEO, stretching back to his stint at Viacom in 2016.
Bakish has privately opposed the Skydance transaction because it dilutes common shareholders, according to people familiar with the situation. Several Paramount Global shareholders have also publicly addressed letters to the company's board, urging directors not to move forward with a Skydance transaction, alleging that it pays Redstone a large premium for her controlling shares while leaving ordinary stockholders out in the cold.
According to CNBC, Skydance and its private equity investors would hold approximately 50% of the firm under the terms of the transaction. The remaining shares would be owned by common shareholders, and the corporation would remain publicly traded.
"At Paramount, we are constantly searching for methods to increase shareholder value. "And, to be clear, that is for all shareholders," Bakish stated on his company's most recent earnings call in February.
Writing By Seraphina Taylor
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