Paramount and Skydance agree to merge, shaking up entertainment industry (NASDAQ:PARA)

1 week ago

A new chapter is opening for Paramount Global (NASDAQ:PARA) following several drama-filled twists that saw it finally agree to a merger with David Ellison’s Skydance Media. It’s a complex transaction (see the details below), but there are hopes it can resurrect a Hollywood icon that has erased about 70% of its market value following the recombination of Viacom and CBS in 2019. The company was later rebranded Paramount Global, but has since experienced cash troubles with its streaming business (Paramount+), suffered a decline in linear TV (CBS and MTV), and saw S&P Global downgrade its debt to “junk” status.

Snapshot: Sony Pictures (NYSE:SONY) and Apollo (NYSE:APO) have also been after the company, as well as IAC Chair Barry Diller. There have been serious M&A tensions along the way, which resulted in the April ouster of Paramount CEO Bob Bakish, who was quickly replaced by an “Office of the CEO” led by three division chiefs. However, the upcoming deal will bring together old and new Hollywood, with the end of the road for the Redstone dynasty and the rise of the Ellison era after big hits like Top Gun: Maverick and the Reacher. Paramount and Skydance have even worked together in the past, co-producing films in the Terminator, Transformers, and Mission: Impossible franchises.

“Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king,” Shari Redstone declared, echoing a call from her father and family patriarch, Sumner Redstone. “Our hope is that the Skydance transaction will enable Paramount’s continued success in this rapidly changing environment. As a longtime production partner to Paramount, Skydance knows Paramount well and has a clear strategic vision and the resources to take it to its next stage of growth. We believe in Paramount and we always will.”

Fine print: The two-step deal would initially see Skydance and its partners acquire National Amusements, which holds the Redstone family’s controlling stake in Paramount, for $2.4B in cash. The next step will merge Skydance with Paramount, offering a total of $4.5B – or $23 in cash or stock to Class A voting shareholders (NASDAQ:PARAA) and $15 for non-voting Class B (PARA) shares – as well as an additional $1.5B for Paramount’s balance sheet. Once the deal closes, Ellison will become CEO of the new Paramount, while former NBCUniversal CEO Jeff Shell (who currently works at Skydance investor Redbird Capital) will run the day-to-day as president. The deal also grants Paramount 45 days to find a competing offer, and will likely take months to close in its current form as regulators review the combination.

In premarket trading: PARAA +7.7% to $22.04; PARA +5.2% to $12.42.
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