Skydance’s David Ellison strikes deal with Paramount

David Ellison’s Skydance Media is about to clear a major hurdle in its quest for Paramount Global.

The media giant’s committee of independent board members gave its approval to Ellison’s purchase of the company, according to four people familiar with the matter who were not authorized to comment.

Formal approval from Paramount’s special committee could come as early as Monday, one of the people familiar with the matter said.

However, the Skydance deal isn’t entirely done. The deal still does not have the consent of Paramount’s majority shareholder, Shari Redstone, sources said. His support is essential for any agreement to move forward.

Representatives for Paramount were not immediately available for comment.

The Redstone family owns 77% of Paramount Global’s majority stock through its holding company National Amusements Inc., giving Sumner Redstone’s heirs enormous influence over the future of the network’s troubled owner Paramount Pictures. broadcast by CBS, Comedy Central, MTV and Nickelodeon.

To complicate matters, as the Skydance sale process drags on, Redstone has attracted interest from at least two other interested buyers for National Amusements.

Late last week, Redstone was reportedly mulling over those offers, including one that would be higher than what Skydance and its partners offered the Redstones. Skydance’s proposal would give the Redstone family more than $2 billion for National Amusements, including money to pay off its debts and its voting stock in Paramount. The family would walk away with about $1.8 billion, one of the sources said.

Redstone has long favored Skydance’s proposal because it would keep intact the media company his father spent decades building into a giant. Both sides appear optimistic that they are getting closer to the finish line, the sources said.

In recent weeks, Redstone has urged Skydance and its partners to increase their offer by at least $1 billion, one of the sources said.

Skydance and its backers RedBird Capital Partners and private equity firm KKR twice increased their bid for Paramount.

Acknowledging that they needed to raise more money and also convince members of the special committee, Skydance and RedBird agreed last week to sweeten their offer. They proposed setting aside about $4.5 billion to buy out certain non-voting Class A and Class B shareholders at $15 per share in a second phase of the transaction. The parties worked all weekend to develop such provisions.

Paramount’s Class B shares rose 7% to $12.71 as of midday Monday.

Skydance and RedBird’s latest offer also includes a $1.5 billion cash infusion to shore up Paramount’s balance sheet and help reduce debt, according to one of the sources.

Further strengthening the bid for Paramount, Oracle’s billionaire chairman Larry Ellison agreed to help his son cross the finish line, one of the sources said.

Skydance Group is now working to get Redstone’s approval, and the two sides are negotiating terms, including Redstone’s request that his family be indemnified against huge potential losses from shareholder lawsuits, according to two of the sources.

Paramount shareholders have long protested the second phase of the deal, in which Ellison intends to consolidate his company, Skydance, into Paramount.

Skydance Media is a Santa Monica production company that has supported film and television hits such as “Top Gun: Maverick,” “Star Trek” and “Grace and Frankie.” In recent years, the company – which has around 1,300 employees – has expanded into the areas of animation, sports and games.

Two years ago, Skydance secured $400 million in funding, giving it a valuation of more than $4 billion.

Paramount shareholders said taking over Skydance would dilute their shares. Non-voting shareholders also complained that the Skydance deal would provide a premium to Redstone and his family for their voting shares.

Under the terms of Skydance’s proposal, not all of Paramount’s shareholders would be bought out. While the Redstone family would be retired, other shareholders would have the opportunity to offer shares or remain investors in Paramount. The idea is that a certain percentage of investors would hold on to their shares in a bet that the Ellison-run company would perform better than Paramount in recent years.

The developments in negotiations come less than a month after Skydance’s exclusive negotiating window expired – and on the eve of Paramount’s annual meeting with shareholders.

Paramount board members previously agreed to consider a rival $26 billion bid for all outstanding shares. and to repay existing debt at Sony Pictures Entertainment and Apollo Global Management, but those negotiations have lost momentum in recent weeks, informed sources said.

Sony, long known as a cautious buyer, began to lose interest in Apollo’s offer, believing it to be too expensive, particularly given the difficulties of Paramount’s cable channels, which still provide the bulk of revenue. operating the business. Sony would also face significant regulatory scrutiny due to foreign ownership restrictions, which would prevent it from owning CBS and its television networks.

One of the company’s most important assets – the top-ranked CBS network – would have been eliminated.

Sony’s Tokyo-based parent company hasn’t forgotten how it overpaid for the Sony/Columbia-Tri Star deal decades ago. So the company was wary of a repeat storyline with Paramount, one of the sources said.

While many Class B shareholders were excited about Sony’s deal with Apollo, Redstone has long opposed certain aspects of the proposal because it would have led to the dissolution of the company and the sale of Sony’s film fleet. Melrose Ave.

Some Hollywood film producers and agents also support Skydance’s bid, saying it represents the best chance to preserve one of Hollywood’s oldest studios, known for such gems as “The Godfather,” “Chinatown,” “Terms of Endearment”, “Top”. Gun” and “Forrest Gump.”

The Wall Street Journal first reported that Redstone was considering other offers for National Amusements. On Monday, CNBC reported that the Skydance deal was close to approval.