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Thursday, June 20, 2024

As Paramount Nears Shareholder Meeting, Details Of Revised Skydance Offer Surface

As Paramount Global approaches Tuesday’s annual shareholder meeting and a high-stakes town hall for employees the following day, new details are emerging about Skydance Media‘s latest acquisition offer.

The David Ellison-led Skydance, which has been in the running for months to take control of Paramount, had sweetened its offer in recent days in order to assuage the concerns of non-voting shareholders. In the current scenario, those shareholders would be in line to receive $15 a share, a 26% premium over the company’s stock price as of Friday. Sources familiar with the discussions confirmed the proposed terms to Deadline after The Wall Street Journal and Bloomberg had reported them earlier Sunday.

In a two-step transaction, Skydance would first acquire National Amusements, which controls nearly 80% of the voting shares of Paramount, though only about 10% of its equity value. The second step would see the company pump cash into Paramount, which would then acquire Skydance. Those are just the broad outlines, of course, as the specific structure of the new entity is the subject of considerable back and forth. Adding yet more intrigue was a report from the WSJ that National Amusements has received overtures from other potential acquirers, including one from producer Steven Paul valuing the company at around $3 billion.

While many in Hollywood, among them top filmmakers like James Cameron, have come out in support of the Skydance deal, a separate scenario involving private equity behemoth Apollo Global Management and Sony Pictures Entertainment drew a lot of fans on Wall Street. Prospects of the Apollo/Sony option have seemingly dimmed in recent days. SPE chief Tony Vinciquerra told Deadline last week that talks were “progressing” between the parties but he also declined to cite Paramount or other M&A opportunities during remarks at a recent Sony investor presentation.

While Skydance’s offer has been sweetened multiple times, and a special committee of Paramount’s board of directors has reportedly given its thumbs-up, a few sticking points remain. Perhaps the biggest is indemnification, the official term for who would back the company if shareholders or other stakeholders decide to sue over the merger. In recent months, as Skydance and its backers, including RedBird Capital, have pursued a deal, the notion of Class B (non-voting) shareholders taking National Amusements CEO Shari Redstone to court has become a realistic threat. One source told Deadline Sunday night that it could potentially derail the deal, as could haggling over a “go-shop” provision that could enable Paramount and National Amusements to seek a better offer than that from Skydance.

The New York Times reported on the remaining hurdles to a deal on Sunday.

Reps from Skydance, Paramount and Redstone declined comment.

The shareholder meeting and the town hall are both set to be significant moments for the three-pronged Office of the CEO installed after Bob Bakish’s ouster earlier this spring. Acquisition news is not expected to be made at the meeting, though the company’s post-Bakish strategy should become a bit more clear. Divvying up the CEO duties are Brian Robbins, President & CEO of Paramount Pictures and Nickelodeon; George Cheeks, President & CEO of CBS; and Chris McCarthy, President & CEO Showtime/MTV Entertainment Studios and Paramount Media Networks. Each delivered brief remarks on Paramount’s quarterly earnings call in April but did not take questions from Wall Street analysts, instead promising to lay out more details soon about their strategic vision. “Soon” officially arrives this week.

At the shareholder meeting, which will be conducted virtually, the execs will deliver a presentation to investors. They are expected to expand on it on Wednesday during a town hall meeting with employees, who are eager to learn more about leadership’s plans. While Paramount’s recent history has been replete with dramatic moments, the current intrigue has taken on an existential dimension. “There’s a lot of emotion involved because of Shari’s family legacy,” one source observed. “It’s only adding to what is already a really complex financial situation to work out.”

With uncertainty clouding Paramount, having a troika at the top is also introducing new uneasiness among the rank and file. Multiple sources inside the company have described to Deadline an increasingly stressful atmosphere given the fact that three senior execs who have steadily risen through the ranks in recent years are now also responsible for the company’s Wall Street profile. As Robbins, Cheeks and McCarthy look to make a favorable impression, each has considerably more experience in the entertainment realm than with financial operations or corporate governance. As they collectively replace Bakish amid rampant speculation about the company’s future, the intensity of the effort has radiated across their respective silos.

Paramount’s beleaguered stock has slipped 17% this year to date as investors have fretted about its effort to profit from streaming even as linear TV continues its inexorable decline. Shares are worth about one-third what they were in 2019 after Redstone’s long-planned reunion of Viacom and CBS finally became reality.

The company did manage last month to pull off a carriage renewal with Charter, the No. 1 U.S. pay-TV operator, without the damaging blackouts that hit Disney in a tussle with Charter last summer.

“We had expected to see at least some longer-tail networks get dropped, so we would consider this part a win for Paramount,” wrote MoffettNathanson analyst Robert Fishman in a recent note to clients, adding that the financials of the agreement remain unknown. “Of course, the total rate Charter agreed to pay Paramount for the entire portfolio of networks, including CBS, Paramount+ ad-tier, Showtime linear and the cable networks, will determine the true degree of the win or loss. Keeping carriage at the expense of accepting a big discount to prior affiliate fee rates would be just as detrimental to future cash flows.”

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