Equities

Redstone Ends $2B Skydance Talks, Paramount Falls 8%

Shari Redstone ends $2 billion Skydance deal; Paramount shares drop 8% to $11.04.

By Jack Wilson

6/11, 20:05 EDT
Paramount Global
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Key Takeaway

  • Shari Redstone ended talks with Skydance Media over a $2 billion deal to control Paramount, causing Paramount shares to fall 8% to $11.04.
  • The decision was influenced by Skydance lowering the cash amount for NAI while increasing payouts to other shareholders; alternative buyers are now being considered.
  • Paramount faces financial challenges, including a downgraded credit rating and losses in its streaming business, adding uncertainty to its future.

Talks with Skydance End

Shari Redstone has concluded discussions with Skydance Media regarding a potential deal that would have transferred control of Paramount from her family to billionaire David Ellison. The negotiations, which had been ongoing for several months, have now ended without an agreement. Skydance had proposed a $2 billion acquisition of Redstone’s National Amusements (NAI), followed by a merger of Paramount into Skydance through a stock deal. The offer included buying out about half of Paramount’s common shareholders at $15 per share and injecting approximately $1.5 billion to help pay off the company’s debt.

NAI announced on Tuesday that the parties "have not been able to reach mutually acceptable terms" and expressed gratitude to Skydance for their efforts. A Skydance representative declined to comment. Following the news, Paramount shares fell 8% to $11.04. The decision came as a surprise to Ellison’s team, which included private equity backers RedBird and KKR, as they believed they were close to finalizing the deal. Paramount’s special committee had given a non-binding endorsement of the bid earlier this month.

Reasons for Termination

Redstone’s decision to end the talks was influenced by Skydance lowering the cash amount allocated to NAI while increasing the payout to other shareholders. People close to the negotiations were shocked by her decision, noting that the Ellison consortium had agreed to nearly all of NAI and Paramount’s demands over the months of discussions. Redstone is now considering offers from other potential buyers.

Billionaire Edgar Bronfman Jr., backed by private equity group Bain, has shown interest in acquiring NAI for more than $2 billion. However, this group would need several weeks to complete due diligence before making a formal offer. Film producer Steven Paul has also expressed interest. Despite these potential suitors, one person involved in the discussions mentioned that there is no real alternative to Skydance’s offer at the moment.

Impact on Paramount

NAI controls about 80% of Paramount’s voting rights despite owning only about 10% of the company’s shares. This means that whoever buys NAI could control Paramount without purchasing the entire company, although non-voting shareholders might challenge such a move in court. Paramount’s stock fell 7.9% following the news of the terminated talks. The Wall Street Journal reported that Redstone might now focus on selling only National Amusements rather than merging Paramount with a bidder.

Paramount’s future has been uncertain, with its streaming business losing money, its linear TV business in decline, and its credit rating downgraded to BB+ by S&P Global in March. The company ousted its CEO Bob Bakish in April, replacing him with a trio of executives who have outlined a vision for cost-cutting, divesting non-core assets, and seeking streaming partners. National Amusements also faced challenges, taking a $125 million strategic investment in May to pay down debt and loans.