The most essential global one Skydance Media is making progress on a deal that would combine the media companies and buy out controlling shareholder Shari Redstone, according to people familiar with the matter.
Paramount Global’s special committee responsible for approving or rejecting the deal and David Ellison’s Skydance Media, backed by private equity firms KKR and RedBird Capital Partners, are narrowing down how Skydance’s assets will be valued in the merger and how much they can escalate the company’s equity capital as part of the recapitalization, they told CNBC.
The sides are close to agreeing on the value of Skydance, said the people, who asked not to be identified because the discussions are private. They claim the entertainment company will be valued at around $5 billion and merged with Paramount Global. Skydance CEO Ellison and private equity firms plan to raise $4.5 billion to $5 billion in fresh capital, people say; part of this amount – about $2 billion – will go to paying off Redstone, and another significant part will go to paying down debt.
Ideally, buyers would complete the transaction in May, the people said. Three of the people said that Paramount Global was delayed in providing data to the Skydance consortium during due diligence, which slightly postponed the timeline for concluding the deal. The exclusivity window for merger talks ends on May 3, but the Skydance consortium wants to extend it by two weeks, the people said.
Skydance plans to name Ellison as CEO of Paramount Global and former NBCUniversal CEO Jeff Shell as president, two people said. People have been saying that Paramount’s current CEO, Bob Bakish, will be leaving the company.
Separately, private equity firm Apollo Global Management and Sony have held preliminary talks about joining forces to buy out all of Paramount Global’s shareholders at a higher price, according to people familiar with the matter. Two people said the special committee had not received specific details about the offer and did not view it as competitive with Skydance’s interests.
But the committee had more details about Apollo’s initial offer, which it chose to ignore in favor of exclusive talks with Skydance, one of the people said. The special committee favored Skydance’s bid over Apollo, in part, because it provided future benefits to shareholders by keeping the company listed and having a cleaner balance sheet, this person said.
Spokespeople for Apollo, the Paramount Global special committee, Paramount Global and the Skydance consortium declined to comment.
The last gigantic hurdle
A significant hurdle that remains is the renewal of Paramount Global’s contract with Charter Communications for CBS and its cable networks. The deal has implications for Paramount Global’s value, which could suffer if Charter drops the network or agrees to a lower freight rate, the people said.
The deadline for concluding this agreement is April 30. Paramount Global reports first-quarter results a day earlier, on April 29.
Paramount Global continues to depend on its conventional television business, which generates about two-thirds of the company’s total revenue.
There are signs that Charter may prove to be a complex negotiator with Paramount Global: Last year, the cable provider, the second-largest in the U.S., briefly stopped offering Disney networks when negotiations to renew the contract between the two companies failed. The parties reached an agreement 10 days later.
Paramount’s cable networks are much less popular than Disney’s ESPN, which could put Bakish in a tender position.
The timing of the contract renewal and deal talks have created an awkward lively in which Bakish, who will ultimately leave the company following the merger with Skydance, will control the fate of Paramount Global from Charter.
So far, Bakish has always struck renewal deals with major pay-TV distributors since he took over as CEO, dating back to his time leading Viacom starting in 2016.
Bakish has privately opposed the Skydance deal because it dilutes common shareholders, according to people familiar with the matter. Several Paramount Global investors also wrote publicly letters to the company’s board urging directors not to pursue the Skydance deal, arguing that it gives Redstone a huge premium for its controlling shares while leaving common shareholders out in the chilly.
Under the terms of the deal, nearly 50% of the company will be owned by Skydance and its private equity partners, CNBC reported on April 5. The remainder of the company will be owned by ordinary shareholders and the company will continue to be listed on the stock exchange.
“At Paramount, we are always looking for ways to create shareholder value. And to be clear, this applies to all shareholders,” Bakish said during his company’s last earnings call, in February.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
