(Bloomberg) — Paramount Global agreed to merge with Skydance Media in a deal that hands control of the storied Hollywood studio to producer David Ellison, capping one of the industry’s most dramatic acquisitions.
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As part of a complicated deal months in the making, Paramount Chairman Shari Redstone agreed to sell her family’s National Amusements Inc., which controls about 77 percent of voting shares in Paramount, for $2.4 billion, the company said in a statement Sunday.
The deal marks an abrupt turnaround after talks between Redstone and Ellison, the son of Oracle Corp. co-founder Larry Ellison, collapsed last month. Redstone’s decision at the time to end the talks stunned the board and frustrated employees and investors, sending shares tumbling.
The Ellison family and RedBird Capital Partners have agreed to invest more than $8 billion in the company, with $1.5 billion going to pay down Paramount’s debt and $4.5 billion going to buy Paramount stock.
Paramount shares rose as much as 7.2% in premarket trading on Monday, before the New York Stock Exchange opened. On Friday, the stock had closed up 3.1% at $11.81.
New ownership and additional capital could provide a fresh start for struggling Paramount, the parent company of CBS and MTV. Saddled with more than $14 billion in debt, the iconic Hollywood company has struggled to compete in streaming and has suffered as cable audiences canceled their subscriptions and abandoned traditional channels like CBS and Nickelodeon. The company had a net loss of $554 million, or 87 cents a share, in the first quarter.
“Given the changes in the industry, we want to strengthen Paramount for the future while ensuring that content remains king,” Redstone said in the statement. “As a long-time production partner of Paramount, Skydance knows Paramount well and has a clear strategic vision and the resources to take it to its next stage of growth. We believe in Paramount and always will.”
Ellison, 41, will be chairman and chief executive. Jeff Shell, a former NBCUniversal executive, will be president. Ellison, who grew up surrounded by Silicon Valley luminaries such as Steve Jobs, believes the company could thrive if it invests more in technology.
Once the deal closes, the Ellison-led group will own about 70% of Paramount’s outstanding shares. The sellers have 45 days to seek better offers. Skydance and Paramount are scheduled to hold an investor conference call at 8:30 a.m. EST.
Paramount, which owns the movie studio behind films like Titanic and The Godfather, has been controlled for three decades by the Redstone family. But the stock has lost more than half its value since the Redstones merged CBS Corp. and Viacom Inc. in 2019 to create Paramount Global.
Redstone, 70, pushed for a Paramount merger with Skydance rather than a deal with other stakeholders, an outcome he believed would be best for his family and the company’s legacy.
She persisted despite opposition from company management and other shareholders, the resignation of four board members and the looming specter of litigation.
She fired the company’s chief executive, Bob Bakish, an outspoken skeptic of the deal, replacing him with a trio of leaders who have promised $500 million in annual cost savings.
Just as a deal with Skydance seemed imminent last month and a special committee of the board met to discuss the proposal, Redstone backed out.
By this time, Ellison had reduced his offer for Redstone’s National Amusements so that he could give more money to other Paramount shareholders, a sticking point in getting the company to agree to the deal but one that put Redstone off.
Paramount, which was acquired by Shari Redstone’s late father, Sumner, in 1994, has been up for sale since late last year. National Amusements has held talks with several suitors, including Sony Group Corp. and Apollo Global Management Inc., which proposed a $26 billion deal. But that offer, which would have involved a foreign owner and the possible consolidation of two major Hollywood studios, was seen as problematic and is likely to face tough regulatory scrutiny.
More recently, Barry Diller, 82, chairman of IAC Inc. and former head of Paramount Pictures, has expressed interest in the company. So has Edgar Bronfman Jr., a longtime media executive.
Redstone came to see Ellison as his best bet. He has been pursuing Paramount for months, sensing a unique opportunity to own one of Hollywood’s oldest studios. Founded in 1912, Paramount Pictures is home to The Godfather, Star Trek and Forrest Gump.
“While people often debated whether content or distribution was king, my father was guided in all his decisions by his belief that content was, indeed, king,” Redstone told employees in an internal memo seen by Bloomberg. “That’s never been more important than today, when in a saturated marketplace, we continue to create content that resonates with our consumers, that they continually seek out and that keeps them wanting more.”
Paramount is currently run by a management committee comprised of three senior executives after the company replaced CEO Bakish in April.
–With assistance from Lucas Shaw and Edwin Chan.
(Update with pre-market operations in the fifth paragraph)
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