In what may well be the most tumultuous M&A activity we've seen in decades, Paramount's cancelled deal with David Ellison's Skydance Media, in conjunction with RedBird Capital, is back on the bargaining table. This comes mere weeks after Shari Redstone pulled out of the planned deal. Will it stick this time? It seems so. Our entertainment lawyer and industry insider, Brandon Blake of Blake & Wang P.A., looks deeper into this latest development.
New Terms Reached
Reportedly, the deal is indeed back on for a revised merger agreement that will see Skydance Media take control of National Amusements, Inc., the parent company of Paramount Global. National Amusements currently controls almost 80% of Paramount's voting shares.
The updated merger document will now head to Paramount's special committee, which is in charge of formulating strategic options for the company. Under the revised deal, Skydance will pay out $1.75B to take control of National Amusements, which is less than the original deal.
However, Redstone herself will receive about $50M more from the proposed terms. She will also gain some protections against potential lawsuits from disgruntled non-voting shareholders in the Paramount Global group. This indemnification was a major bottleneck in the last round of talks. The "majority of the minority" vote requirement, which Ellison has been firmly against, has also been removed.
Go-Shop Period
According to reports from the Wall Street Journal, National Amusements and Skydance will also enter a 45-day "go-shop" interlude, during which any other potential bidders can also come to the table with an offer. This seems strange, given Skydance's lengthy pursuit of a deal with Paramount. However, it could also reignite interest from private equity firm Apollo Capital Management and Sony. It may even bring Byron Allen's abortive bid back into play.
No matter how the deal pans out, one thing's for sure. This must be one of Hollywood's most erratic and messy M&A processes in many years. Paramount was already struggling under the decline of its linear TV services and the failure to make much of its abruptly-launched streaming platform. This was, of course, further exacerbated by the pandemic, turbulent post-pandemic period, and the 2023 dual strikes. These excruciating knock-on effects on their stock price, long-term debt, and the rapid changes in their management team and C-suite are not helping.
While we saw much talk last week of Paramount potentially trying to go it alone, this intense turbulence has made finding a deal—any deal—a major priority. Currently, Paramount needs $500M in annual cost savings and possibly the divestiture of some of its assets to even hope for a recovery. There are also lofty plans to improve its streaming endeavors and talk of further layoffs.
However, the bearish market sentiment continues, and the longer a deal takes, the worse it gets. Let's also not ignore the fact that, over 7 months later, only Skydance has made serious overtures for Paramount. That doesn't bode well for their overall vitality.
At least one thing is clear in this mess: Paramount needs a deal, and it needs it fast. Skydance it just may well be. Again. For real, this time.
