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What’s Next for Paramount After Skydance Merger Ends
The Future of Paramount Global (FOR) now hangs in the balance after Shari Redstonewho controls Paramount through his family’s holding company, National Amusements (NAI), has closed merger negotiations with Skydance Media.
“I was surprised,” J. Christopher Hamilton, former entertainment industry executive and professor at Syracuse University, told Yahoo Finance. “The agreement seemed to be a long way off.”
Hamilton wasn’t the only one shocked by the decision. A special independent committee of Paramount’s board recently recommended the economics of the Skydance deal after months of back-and-forth — and was even scheduled to vote on the merger just before Redstone’s reversal.
Investors took notice too, with shares of Paramount falling about 8% after the decision became known to the public.
“Immediately, we heard industry executives and investors calling her crazy and many others unspeakable for not ‘taking the money’ from Skydance,” Rich Greenfield of LightShed Partners wrote on Wednesday.
So why did Redstone leave – and what could the decision mean for the company she controls?
“Ultimately, we believe that the legal risk of the proposed Skydance transaction proved to be too high relative to National Amusements’ alternatives,” Greenfield wrote, noting that the Skydance transaction was “great” for Redstone and NAI but “terrible” for Paramount’s public shareholders.
Skydance, which has previously collaborated with Paramount on the production of popular film franchises including “Mission: Impossible,” “Top Gun: Maverick” and “Transformers,” reportedly revised your offer several times after non-voting shareholders expressed concerns on the terms of the initial discussions, which would have given Redstone $2 billion in cash as the first step in the transaction.
But critics maintained that the offer still unfairly benefited Redstone while diluting the stakes of public stakeholders. The threat of litigation arose as a result.
Hamilton agreed that the threat was the main obstacle to the transaction, especially since Redstone likely needed to be indemnified against potential lawsuits as part of the settlement.
“I just don’t think that’s a level of risk that Skydance is willing to accept,” he said.
What’s Next for Paramount
Amid the merger drama, Paramount announced the match of CEO Bob Bakish in late April, after he was allegedly at odds with Redstone about the Skydance deal. It has since been replaced by an “Office of the CEO” consortium made up of the company’s three division heads.
The story continues
Executives gathered for the company’s annual shareholder meeting on June 4, where they unveiled a plan to cut costs worth $500 million. The plan will include layoffs, exploring potential asset sales and partnering with competitors for streaming joint ventures.
The company had previously considered selling parts of its business, which industry observers say will be the norm after Skydance’s collapse. BET It is Show time in particular, they have been the subject of consistent sale rumors in recent years. Paramount ultimately decided against selling the company in parts, largely due to Redstone’s preference to keep the company together.
“There was an attempt to keep the organization intact to increase the sale value, but now I think they are looking for ways to contain costs and sell assets rather than the entire organization,” Hamilton said.
Shari Redstone, president of ViacomCBS and president of National Amusements, reacts as she celebrates her company’s merger on the Nasdaq Market website in New York, December 5, 2019. (REUTERS/Brendan McDermid) (REUTERS/Reuters)
There remains the possibility that Redstone could sell all or part of his controlling interest in National Amusements to a third party, analysts said.
“Ms. Redstone now appears intent on continuing with the status quo or just divesting her stake in NAI,” MoffettNathanson analyst Robert Fishman wrote Tuesday.
Looking ahead, Greenfield said he expects a lull in Paramount’s M&A activity over the next 12 to 18 months: “There are a lot of easy moves mentioned above to create value that don’t require a sale today.”
Still, he believes “National Amusements is eager to sell Paramount eventually.”
But Fishman cautioned, “Any plan, and any potential buyer of Paramount, will have to deal with a company whose asset mix presents, in many ways, a challenging hand in navigating fickle media winds,” a nod to the network’s linear exposure. from Paramount. debt balance and profitability problems that include losses of US$286 million in its streaming business alone.
The main gate of Paramount Studios is seen on Melrose Avenue, July 8, 2015, in Los Angeles. (AP Photo/Nick Ut, File) (ASSOCIATED PRESS)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, and email her at alexandra.canal@yahoofinance.com.
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