Skydance Still In Pole Position For Paramount As Two Hash Out Terms; Sony & Apollo Waiting In The Wings

Jill Goldsmith and Anthony D'Alessandro
·5-min read

Skydance and Paramount are deep into hashing out a complicated deal that would see the David Ellison’s studio and its backers take control of the storied film and television company owned by Shari Redstone. The exclusive month-long negotiating period through May 3 is likely to be extended perhaps by a few weeks, Deadline hears, given the complexity of the transaction.

The rough contours of a Skydance deal would see a circa $2 billion payout to Redstone for a majority stake in family holding NAI (which controls Paramount though its voting Class A shares) as well as the National Amusements theater chain and associated real estate assets. Step two would see Paramount acquire Skydance in an all-stock deal valued at circa $4-5 billion. That’s being worked on and will likely wind up at the high end of the range.

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Skydance’s last capital raise in the fall of 2022, with KKR as a new investor, valued the company at over $4 billion.

Lastly, Par’s new owners, led by deep-pocketed Oracle founder Larry Ellison and RedBird Capital, would infuse Paramount with a few billion dollars of fresh cash.

The company would stay together and stay public.

Meanwhile, private equity giant Apollo — after an initial offer for the studio and a solo $25+ billion bid for the whole company got zero traction — joined with Sony for a like-sized cash offer that would take Paramount private and likely split it up. The partners have not made a formal offer yet given the ongoing Paramount-Skydance talks. But Deadline hears they are considering doing so even before exclusivity ends, and, certainly, if no deal emerges. Skydance has a big head start and Sony sees its joint offer more like a reasonable alternative if that falls through. The duo would also need time for due diligence, the deep dive into Paramount’s financials offered to Skydance.

Investors in Paramount, who mostly own the more liquid but non-voting Class B shares, have vocally opposed the Skydance deal because it is front-loaded for Shari Redstone but has no takeout premium for them. Dual classes of voting and non-voting stock ensure family control of a company even when it might only hold a small amount of the equity, as in Redstone’s case. A number of institutions have threatened to sue Redstone and the board for a breach of fiduciary duty. News earlier this month that four Paramount directors will step down from the board at the annual meeting was an odd look.

There’s the argument that savvy investors are aware of the two classes of stock and know they’re buying into a so-called “controlled company.” Most own the B shares. Mario Gabelli, founder and CEO of GAMCO Investors, does own voting stock — the biggest chunk of it after Redstone — and has publicly protested the outlines of a deal done over his head without offering him a price.

Litigation is par for the course in M&A. If this deal closes, only time will tell how strong the case is.

Skydance would collapse the two classes of shares. And it’s banking on the fact that a cash injection coupled with a restructuring will boost Paramount’s anemic stock price over time. Investors like the Ellisons and RedBird will have significant skin in the game.

David Ellison would run Paramount with Jeff Shell as president. Other roles are TBD, including one for Jeff Zucker. Skydance chief creative officer Dana Goldberg would play a big role in a combined company.

Comcast terminated Shell as CEO of NBC Universal abruptly a year ago for an “inappropriate” relationship with someone at the company. The seasoned exec subsequently joined RedBird as its chairman for sports and media investments.

Zucker heads a RedBird joint venture with IMI, an Abu Dhabi-based investment fund.

Hollywood, unlike many shareholders, largely embraced a Skydance deal over one with Apollo given the checkered history of private equity. Sony’s joining Apollo was a twist.

Deadline hears that while Apollo’s lone bid included Saudi money, the offer it’s contemplating with Sony does not. But there would be regulatory hurdles to scale including approval to merge two of the last major studios — albeit both much smaller than Disney or Fox, which combined in 2019. Talent, and their agents, would not be thrilled at having one less place to shop projects.

Foreign ownership rules would likely preclude Sony from owning Paramount’s broadcast assets, which would be something for Apollo to figure out. The giant firm already holds TV stations in a venture with Cox Enterprises and it’s not clear how many more it can add before running up against a federal cap on station ownership by reach. Sony mostly wants the studio and intellectual property, especially on the TV side to expand its roster of shows. We understand that should Skydance and Paramount talks falter, then Sony/Apollo would ask for an exclusive window for negotiations.

One can assume duplicative roles would results in layoffs in a Sony acquisition.

Skydance will keep assets intact but, Deadline hears, is also looking at fundamentally restructuring Paramount, rationalizing functions across CBS, cable, BET and Nickelodeon under a central team. Shell engineered something similar at Universal Television in 2020. A Disney restructuring under Bob Iger early last year created a new Disney Entertainment division. Skydance is eying ways to reduce linear costs and boost margins, Deadline hears. If it finds a formula for running linear businesses in a word of cord-cutting, it will be the first.

Paramount is struggling with high debt, ongoing streaming losses and the decline of linear television. The company gave a heads up in February that it will report a $1 billion charge related to layoffs and programming shifts in its first quarter earnings due out next week. And a looming date is April 30, when Paramount’s carriage contract with Charter Communications expires. As per usual at these moments, the nation’s second largest cable provider will look to pay less and maybe drop lower-rated networks. Charter has said that a landmark deal it did with Disney last year — which cut some longstanding channels and included Disney+ in the package — will be a template in future negotiations.

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