Skydance Media’s offer to acquire National Amusements and merge its studio with Paramount Pictures is not a traditional takeover. The question about Paramount Global Shareholders might ask: Is it better than no deal?
Skydance has presented a unique pitch to Paramount Global’s special committee, which is responsible for accepting or rejecting deals, and its investors, according to four people familiar with the parameters of the offering. Paramount Global would continue to trade publicly. Skydance would own either a significant minority stake or a majority stake in Paramount Global by combining its assets and raising new equity capital, which it would acquire along with its private equity partners RedBird Capital Partners and KKR.
The consortium’s ownership stake in the new company could be around 45% or just over 50%, said the people, who asked not to be identified because the discussions are private. No details have been set and all are subject to change, the people said.
Spokespeople for Paramount Global and Skydance declined to comment.
The new equity will be dilutive for existing shareholders. But it will align voting rights and economic control in a way that was not the case with the Redstone family, which currently owns, directly or indirectly, 77% of Paramount Global’s Class A voting shares and 5.2% of its Class B common shares owns. about 10% of the company’s total equity.
While Skydance CEO David Ellison is primarily responsible for arranging the deal, his father, oracle Co-founder and Chairman Larry Ellison will raise some of the new funding, the people said. It would also potentially give Paramount Global access to artificial intelligence software and other data technology from Oracle.
Paramount Global has many valuable legacy media assets, including CBS, the Paramount Pictures studio and its physical properties, a studio library with films such as “The Godfather,” “Titanic” and “Forrest Gump,” and cable channels such as Comedy Central and Nickelodeon. It also owns its subscription streaming service Paramount+ with more than 67.5 million subscribers and its free ad-supported service Pluto TV with more than 80 million monthly active users.
Still, the company has struggled to grow in recent years. Paramount Global’s annual revenue was $29.7 billion in 2023, down 1.7% from 2022. Paramount+ continues to lose money. Paramount Global’s debt rating was downgraded to “junk” by S&P Global Ratings last month as the company’s broadcast and cable television businesses decline as traditional pay-TV subscribers cancel.
Paramount Global has a market capitalization of about $7.6 billion and had $14.6 billion in long-term debt at the end of 2023. When CBS and Viacom merged in 2019, the company’s combined market value was about $30 billion.
Shares traded about 5% lower on Friday.
The Skydance plan
Over the last decade, Oracle has successfully transformed itself from a legacy enterprise technology company to one focused on cloud services and AI. This provides a similar thematic blueprint for what the Ellisons want to do with Paramount Global – a legacy media company that needs to pivot to the future to justify its existence.
David Ellison would likely lead the new company.
Jeff Shell, former CEO of NBCUniversal, is also expected to take on a key leadership role in his role as chairman of sports and media at RedBird. Management would be open to divestitures that current CEO Bob Bakish explored but ultimately rejected, such as the sale of BET Media Group and Showtime, the people said.
The new leadership would also examine more existential questions for Paramount Global, such as the future of Paramount+ and what role the company should play in the broader media ecosystem. No decisions have yet been made on these larger strategies, it said.
Better than nothing
The proposed transaction is not a full acquisition of Paramount Global. That’s what Paramount Global’s board would prefer, but Ellison balked at it, the people said.
Still, the message to investors will be that the combination of David Ellison, his father’s stake, Shell, Skydance’s assets and its commitment to new media (including Skydance’s video game development studio) is simply better for future growth than Redstone and Bakish .
Paramount Global’s special committee must decide whether Skydance’s complicated transaction is better than the status quo – and better than any other offer that may come along. The two sides have begun exclusive discussions to conduct more in-depth due diligence and possibly reach an agreement in the next one to two months, the people said.
There may be other avenues that could be pursued. Private equity companies Apollo Global Management As the Wall Street Journal reported this week, the company recently made a $26 billion offer for the entire company. However, Paramount Global’s special committee has decided to continue the Skydance discussions exclusively. Redstone has been unofficially seeking a buyer for Paramount Global for years, according to people familiar with the matter. Apollo’s delayed offer could be an attempt to keep the private equity firm in line if the Skydance transaction falls through.
Warner Bros. Discovery held preliminary talks with Paramount Global but stopped working on a deal earlier this year, CNBC reported in February.
WATCH: Faber report: Paramount Global deal hits the fast track
Disclosure: NBCUniversal is the parent company of CNBC.
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2024-04-05 16:55:23
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