David Ellison’s Skydance Media sweetens offer for Paramount
David Ellison’s Skydance Media and its investment partners have increased their offer to Paramount Global board members, signaling the technology scion’s strong intent to take over the storied media company.
Two people close to the discussions who were not authorized to comment confirmed the new offer, but precise terms were not disclosed.
The move comes less than a month after Skydance’s exclusive negotiating window expired without a deal. Since then, Paramount board members have been considering a rival $26-billion bid from Sony Pictures Entertainment and Apollo Global Management, but those talks have been slow, knowledgeable people have said.
Controlling shareholder Shari Redstone has long preferred Skydance’s proposal, which would give her family a premium on their voting shares. Redstone, Paramount’s non-executive chair, would like to see the New York-based media behemoth her father built remain whole, rather than be carved up.
Some film producers and agents also are rooting for the Skydance bid, believing it represents the best chance to preserve one of Hollywood’s oldest studios — a famous fixture on Melrose Avenue. In addition to Paramount Pictures, the company owns the CBS television network, CBS television studios and cable channels including TV Land, Nickelodeon, BET and MTV.
Rather than leading Paramount to reclaim its place among industry titans, Redstone’s tenure atop the company has been marred by miscalculations and setbacks.
Both sides recognized that previous proposals by Skydance — joined by RedBird Capital Partners and private equity firm KKR — would not pass muster with shareholders, including those beyond the Redstone family who hold voting A-class shares, knowledgeable people have said.
The new proposal, which came earlier this week, increases the amount of money that would go to shareholders, one of the knowledgeable people said.
In the waning days of Skydance’s exclusive negotiation period, which ended May 3, Skydance and RedBird increased the financial terms of the proposal under consideration by a special committee of Paramount’s board. At the time, the bidding group had offered $5 billion, which included about $2 billion to buy out the Redstone family shares.
But board members and the Ellison team disagreed over how much of the remaining $3 billion would be used to pay down debt and how much money would go to shareholders.
Redstone has the power to push through the deal she wants because her family’s National Amusements Inc. owns 77% of Paramount’s voting shares. However, she and her fellow board members also have a fiduciary duty to look out for the interests of all shareholders.
Redstone’s willingness to work exclusively with Ellison to forge a complicated two-phase transaction, which would lead to a roll-up of Ellison’s smaller Skydance production company, infuriated investors. The wrangling caused months of tensions in Paramount’s boardroom and contributed to the ouster of Chief Executive Bob Bakish, who was open to considering the Sony-Apollo deal.
Four Paramount board members are stepping down next week at the company’s annual shareholders meeting.
The Wall Street Journal first reported the new bid by Skydance.
Any deal would have to be approved by regulators.
The deal envisioned by Sony Pictures and Apollo would buy out Paramount shareholders and retire Paramount’s existing debt. Sony was expected to be the lead investor and absorb Paramount’s film studio operations and franchises. Apollo, which has television station holdings, was expected to claim the CBS side of the business.
But there’s been little momentum in their talks with Paramount’s board, knowledgeable people said.
During a presentation for Sony investors Wednesday night, Sony Pictures Entertainment Chief Executive Tony Vinciquerra said the company would be disciplined in its approach to dealmaking.
“We will not make investments that don’t complement our current strategy,†he said. “Our strategy is to have more [intellectual property], more product, more library to sell.â€
Unlike Hollywood’s other major studios, Sony has not lost billions of dollars trying to create a stand-alone streaming service. Instead, the Culver City studio has profited by selling its shows to other distributors and streaming services, including Netflix.
Vinciquerra made it clear there were boundaries to Sony’s investment interests, suggesting the company wasn’t about to bulk up on cable television channels, a sector of the business that has been under particular strain in the shift to streaming.
“We’re not going to get into a general entertainment streaming service,†Vinciquerra said. “We’re not going to be operating other businesses that are outside the strategy that we’ve defined.â€
Staff writer Samantha Masunaga contributed to this report.
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