Paramount Global and Skydance Media are moving forward on a deal that would merge the media companies and buy out shareholder Shari Redstone, according to people familiar with the matter.
Paramount Global’s special committee, in charge of accepting or rejecting the transaction, and David Ellison’s Skydance Media, which is backed by private equity firms KKR and RedBird Capital Partners, are narrowing down what parts of the merger will take place. How to value Skydance’s assets as equity to add to the company as part of the reinvestment, the people told CNBC.
The parties are close to agreeing on a value for Skydance, said the people, who spoke on condition of anonymity because the talks are private. He said the entertainment company would be worth about $5 billion and would be merged with Paramount Global. Skydance CEO Ellison and private equity firms plan to raise about $4.5 billion to $5 billion in new equity, the people said; Some of that — about $2 billion — will be used to pay off Redstone, and another significant portion will be used to pay down debt.
Buyers would ideally like to do a deal in May, the people said. Paramount Global was slow to provide data to the Skydance consortium during due diligence, pushing back the deal’s timeline slightly, three of the people said. The exclusive window on merger talks ends on May 3, but the Skydance consortium wants to extend it by two weeks, the people said.
Sky Dance plans to name Ellison, CEO of Paramount Global, and former NBC Universal CEO Jeff Shell as president, two of the people said. Current Paramount CEO Bob Buckish will leave the company, the people said.
Separately, private equity firm Apollo Global Management and Sony have held preliminary talks about teaming up for a deal that would buy out all Paramount Global shareholders at a premium, according to people familiar with the matter. The special committee has not received concrete details on the offer and does not see it as a competing bid for Skydance’s interest, two of the people said.
Still, the committee had more details about the initial offer made by Apollo, which it chose to ignore in favor of exclusive talks with Skydance, one of the people said. The special committee favored Skydance’s offer over Apollo in part because it offered future upside to shareholders by keeping the company public with a clean balance sheet, the person said.
Spokesmen for Apollo, the Paramount Global Special Committee, Paramount Global, and the Skydance consortium declined to comment.
The last major hurdle
One major hurdle that remains is Paramount Global’s renewed contract with Charter Communications for CBS and its cable networks. The deal is tied to the value of Paramount Global, which could suffer if Charter drops networks or agrees to lower carriage rates, the people said.
The deadline for this deal is April 30. Paramount Global reports first-quarter earnings a day earlier, on April 29.
Paramount Global still depends on its traditional TV business, which accounts for about two-thirds of the company’s total revenue.
There are signs that Charter could be a tough negotiator with Paramount Global: Last year the cable provider, the second-largest in the U.S., briefly Blocked from carrying the Disney network When the renewal negotiations between these two companies failed. The parties reached a deal 10 days later.
Paramount’s cable networks are far less popular than Disney’s ESPN, which could put Buckish at a disadvantage.
The timing of the renewal and the deal negotiations created an awkward move, where Buckish, who would eventually leave the company under the Skydance merger, would control Paramount Global’s fortunes with Charter.
Until now, Bakesh has always renewed deals with major pay-TV distributors since taking over as CEO, dating back to his time running Viacom, which began in 2016.
Bukesh has privately argued against the Skydance deal because it dilutes ordinary shareholders, according to people familiar with the matter. Several Paramount Global investors have also publicly written letters to the company’s board urging directors not to proceed with the Skydance deal, arguing that it would give Redstone its controlling stake. Pays a huge premium for the shares while leaving common shareholders out in the cold.
Under the terms of the deal, Skydance and its private equity partners will own about 50% of the company, CNBC reported on April 5. The rest of the company will be owned by common shareholders, and the company will continue to trade publicly.
“At Paramount, we’re always looking for ways to create shareholder value. And let’s be clear, that’s for all shareholders,” Bakesh said. During your company’s most recent earnings call, in February.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
Credit : www.cnbc.com
