Paramount CEO Bob Bakish speaks with CNBC’s David Faber on September 6, 2023.
CNBC
In a storyline that could easily have come from the hit HBO series “Succession,” Paramount Global The company plans to replace Chief Executive Bob Bakish on Monday with a cohort of existing department heads, according to people familiar with the matter. This is a chessboard shift designed to accelerate the company’s future – one way or another.
Paramount is expected to announce Bakish’s departure on Monday, before the company reports its earnings call, which takes place after the market closes.
The decision to fire Bakish as CEO comes as Paramount Global enters into a merger agreement with Skydance Media. His departure calls into question Paramount’s near-term future as a standalone company, which could help push through a merger agreement.
The Skydance consortium, which includes private equity firms KKR and RedBird Capital, has proposed a deal with new terms to Paramount’s special committee as a “best and final” offer, people familiar with the matter say. Skydance is waiting to hear back from the special committee on whether it will accept the offer, said the people, who asked not to be identified because the discussions are private.
As part of the new deal on the table, majority shareholder Shari Redstone has agreed to take less than $2 billion for her majority stake in Paramount – less than what Skydance originally offered her. The Skydance consortium is raising additional capital to pay Class B common shareholders a nearly 30% premium to the untroubled trading price of about $11 per share, according to people familiar with the new deal. In total, Redstone and Skydance would contribute $3 billion, with the vast majority going to Class B shareholders, the people said.
Skydance’s value under the deal remains at about $5 billion, the people said.
Majority of the minority
A remaining sticking point – and a potential dealbreaker – is whether a so-called “majority of the minority” should vote on the deal, which would give common shareholders the opportunity to potentially influence the outcome. The special committee tasked with evaluating the offer would also be the party that would put the deal to a vote.
A number of large common shareholders, including Gamco Investors, Ariel Investments, Matrix and Aspen Sky Trust, have publicly criticized the deal, arguing it destroys the value of common shareholders.
Redstone is open to the vote, but Skydance believes it has met all of the special committee’s conditions and is prepared to withdraw from the deal if such a vote is necessary given the improvements the company made on Monday, sources tell CNBC.
Forcing such a vote now would change the structure of the deal for Skydance, which already pays Redstone a significant premium for its majority stake and paying Class B shareholders, said two people familiar with the Skydance consortium’s thinking.
Spokespeople for Skydance and Paramount Global’s special committee declined to comment. A spokesman for National Amusements, which owns Redstone, said the decision on whether to accept the deal would rest with Paramount Global’s special committee.
“National Amusements has specifically requested that the Paramount board form a special committee to exercise its independent judgment in considering a potential transaction with Skydance,” a National Amusements spokesperson said in a statement to CNBC. “National Amusements has no role in the committee and we respect the committee’s process and final decision on whether the Skydance deal represents an attractive transaction for Paramount and whether they want to move forward.”
Shares of Paramount Global were up about 4% as of 2 p.m. ET on Monday.
Shari Redstone, president of National Amusements and majority shareholder of Paramount Global, walks to a morning session at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, July 12, 2023.
David A. Grogan | CNBC
Status quo in chaos
By ousting Bakish, Redstone and the Paramount Global board are now throwing the status quo into chaos. The company will no longer have a leader or a clear future strategy. Redstone may be trying to force the common owners to sell, effectively destabilizing the company without a sale.
Exclusivity talks with Skydance are scheduled to end on May 3rd. CNBC reported Thursday that Skydance was nearing review terms but wanted a two-week extension of exclusivity, which may now be moot with its latest best and final offer.
A joint offer from private equity firm Apollo Global and Sony could serve as a white knight if the special committee rejects the Skydance deal. The New York Times reported in early April that the two parties had held preliminary discussions about a deal. Still, it’s unclear whether Redstone would consider selling to a large private equity firm, which would likely break up the company over time. Redstone chose to ignore Apollo’s earlier offer and negotiate with Skydance instead.
Meanwhile, Paramount has finalized a key broadcast renewal deal with US cable company Charter Communications in the coming days, but the deadline could be extended. Bakish was intensively in negotiations with Charter. It is unclear how his removal will impact these negotiations, which will play a large role in the company’s future valuation.
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2024-04-29 18:12:32
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