Paramount Global (PARA) shares sank nearly 8% on Tuesday after Shari Redstone, who controls Paramount through her family’s holding company National Amusements (NAI), ended merger talks with Skydance Media, NAI confirmed in a statement.
As first reported by the Wall Street Journal, Redstone will now likely pursue a sale of just NAI, rather than attempting to merge Paramount into another company. Hollywood producer Steven Paul has reportedly expressed interest, along with media executive Edgar Bronfman Jr.
It’s a surprising development, considering an independent special committee of Paramount’s board recently recommended the economics of the Skydance deal after months of back-and-forth talks. The Journal said the committee was slated to vote on the Paramount merger with Skydance on Tuesday afternoon.
In a statement, National Amusements said it was not able “to reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI.”
“NAI is grateful to Skydance for their months of work in pursuing this potential transaction and looks forward to the ongoing, successful production collaboration between Paramount and Skydance,” the statement read. It will continue to support and “explore opportunities to drive value creation for all Paramount shareholders.” Paramount declined to comment.
Outside of Skydance, other interested parties in Paramount have included Sony Pictures Entertainment and private equity firm Apollo Global Management, along with Warner Bros. Discovery (WBD), media mogul Byron Allen, and others. (Disclosure: Yahoo Finance is owned by Apollo.)
Notably, Shari Redstone had consistently favored the Skydance deal compared to the other offers, according to multiple reports.
Skydance, which has previously collaborated with Paramount on the production of popular film franchises, including “Mission Impossible,” “Top Gun: Maverick,” and “Transformers,” revised its offer multiple times after nonvoting shareholders expressed concerns over the terms of its first deal, which was valued at $5 billion.
The latest offer, valued at a sweetened $8 billion, included Shari Redstone selling National Amusements’ controlling stake in Paramount for around $2 billion, according to CNBC. National Amusements owns approximately 10% of Paramount’s equity capital value and maintains 77% of voting shares.
Backed by private equity firms RedBird Capital and KKR, Skydance would have then merged its studio business with Paramount’s at a reported price that valued the legacy media giant at just under $5 billion. Skydance and its affiliates would have also offered a cash injection of $1.5 billion to help pare down Paramount’s debt, the report added.
Skydance offered to purchase about half of Paramount’s nonvoting shares for $4.5 billion, or roughly $15 a share, CNBC said. As first reported by the Wall Street Journal, nonvoting shareholders would have had the option to cash out about half of their stock at the $15 premium, with the remainder of shares converting into shares of the newly merged company.
A separate report from Bloomberg said investors in Paramount’s voting stock, outside of the Redstone family, would have secured a price of $23 a share.
Amid the merger drama, Paramount announced the departure of CEO Bob Bakish in late April after he was reportedly at odds with Redstone over the Skydance deal. He’s since been replaced by an “Office of the CEO” consortium made up of three company division heads.
Last week, the executives gathered for the company’s annual shareholder meeting — despite the unknowns surrounding its future.
At the time, the CEOs unveiled a plan to cut $500 million worth of costs, which will include layoffs, in addition to exploring potential asset sales and partnerships with competitors for streaming joint ventures.
“We all agree that Paramount is not where we want it to be,” co-CEO Chris McCarthy said during the meeting. “Given the strength of our assets, our people, and our long-term competitive advantage of making some of the biggest and broadest hits, we know that there is significant value to be unlocked.”
Management said it is prepared to move quickly on cost reductions and that $500 million in cost savings is “just the beginning,” with more announcements expected in August — pending, of course, a potential sale.
“We’re confident the business can be run much more efficiently by adjusting to the realities of the environment we’re operating in today,” said co-CEO George Cheeks, who cited duplicative teams and functions across several areas such as real estate, technology, and marketing. “These cost reductions will be a major step in positioning the company for long-term sustainable growth.”
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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