Skydance in Exclusive Talks for Paramount Global Takeover Amid Industry Competition

Key Takeaway

• Skydance in exclusive talks with Shari Redstone for a potential Paramount Global takeover, following Paramount's rejection of Apollo's $26bn offer.
• The deal could strengthen Paramount against streaming giants by merging with Skydance, known for "Top Gun: Maverick," amidst intense industry competition.
• Paramount's stock rose 15% to $13.52 after news of the talks, highlighting market optimism about the strategic merger's potential to reshape the media landscape.

Paramount and Skydance: Strategic Negotiations

Skydance, known for its collaboration on "Top Gun: Maverick," is in exclusive talks with Shari Redstone to potentially take control of Paramount Global. This development follows Paramount's rejection of a $26bn takeover offer from Apollo. David Ellison of Skydance and Shari Redstone, representing her privately owned cinema company National Amusements (NAI) that controls 77% of Paramount's voting stock, have a 30-day window to finalize a deal. This period of exclusivity underscores the mutual interest in merging Paramount with Skydance, aiming to conclude months of negotiations.

Paramount's board previously declined Apollo's bid, which valued the media group at $17 to $19.50 per share, including debt, marking a significant premium over Paramount's share price before the news of the talks broke. The company's share price saw a 15% increase to $13.52 following reports of the exclusive discussions. Apollo's proposal also considered taking on Paramount's existing debt, which exceeds $16bn, without the need for refinancing despite a recent rating agency downgrade.

Strategic Implications and Stakeholder Perspectives

Shari Redstone, who inherited control of the entertainment conglomerate from her late father Sumner Redstone, sees a merger with Skydance as strategically advantageous over selling to a financial buyer like Apollo. Paramount, behind iconic films and TV shows, faces intense competition in the streaming market against giants like Disney and Netflix. The potential merger with Skydance, which has backing from investors such as KKR, RedBird Capital, and Tencent, could bolster Paramount's position in the industry.

David Ellison's Skydance, in collaboration with Paramount on successful projects like "Top Gun: Maverick," could bring a strong media team to the combined entity, including potential roles for former NBCUniversal chief Jeff Shell and former CNN boss Jeff Zucker. This merger could significantly impact the media landscape, offering a more competitive stance against larger streaming and entertainment companies.

Market Reactions and Analyst Insights

The exclusive talks between Paramount and Skydance have sparked interest and speculation in the market, with Paramount's stock experiencing a notable uptick following the announcement. Analysts like MoffettNathanson's Robert Fishman have commented on the strategic importance of Paramount's content creation capabilities, suggesting that separating the studio from its other businesses could diminish the company's overall value.

The potential merger is viewed as a pivotal move for Shari Redstone, aiming to secure the future of her family's media empire in a rapidly changing entertainment industry. The negotiations reflect a broader industry trend of consolidation and strategic realignment to better compete in the global streaming market.

Management Quotes

• Shari Redstone, President of NAI and non-executive chair of Paramount:

  "Redstone believes that a deal with Ellison would make more strategic sense than selling to a financial buyer, according to several people familiar with the matter."