Paramount and Skydance inch closer to a merger as key hurdle looms, sources say

Paramount
Global
and
Skydance
Media
are
making
progress
on
a
deal
that
would
merge
the
media
companies
and
buy
out
controlling
shareholder
Shari
Redstone,
according
to
people
familiar
with
the
matter.

Paramount
Global’s
special
committee,
in
charge
of
accepting
or
rejecting
transactions,
and
David
Ellison’s
Skydance
Media,
backed
by
private
equity
firms
KKR
and
RedBird
Capital
Partners,
are
narrowing
in
on
how
to
value
Skydance’s
assets
as
part
of
a
merger,
as
well
as
how
much
equity
to
add
to
the
company
as
part
of
a
recapitalization,
the
people
told
CNBC.

The
sides
are
close
to
agreeing
on
a
value
for
Skydance,
said
the
people,
who
asked
not
to
be
named
because
the
discussions
are
private.
The
entertainment
company
would
be
valued
at
around
$5
billion
and
merged
with
Paramount
Global,
they
said.
Skydance
CEO
Ellison
and
the
private
equity
firms
plan
to
raise
roughly
$4.5
billion
to
$5
billion
in
new
equity,
the
people
said;
some
of
that
—
about
$2
billion
—
would
be
used
to
pay
Redstone,
and
another
substantial
portion
would
be
used
to
pay
down
debt.

The
buyers
would
ideally
like
to
get
a
deal
done
in
May,
said
the
people.
Three
of
the
people
said
that
Paramount
Global
was
slow
to
provide
data
during
due
diligence
to
the
Skydance
consortium,
which
has
slightly
pushed
back
the
timeline
on
a
deal.
The
exclusivity
window
on
merger
talks
ends
May
3,
but
the
Skydance
consortium
wants
to
extend
it
by
two
weeks,
said
the
people.

Skydance
plans
to
name
Ellison
as
CEO
of
Paramount
Global
and
former
NBCUniversal
CEO
Jeff
Shell
as
president,
said
two
of
the
people.
Current
Paramount
CEO
Bob
Bakish
would
depart
the
company,
the
people
said.

Separately,
private
equity
firm
Apollo
Global
Management
and
Sony
have
held
preliminary
discussions
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
hasn’t
received
concrete
details
on
that
offer
and
isn’t
viewing
it
as
a
competitive
bid
to
Skydance’s
interest,
two
of
the
people
said.

Still,
the
committee
had
more
details
on
an
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’s
in
part
because
it
offered
shareholders
future
upside
by
keeping
the
company
public
with
a
cleaner
balance
sheet,
the
person
said.

Spokespeople
for
Apollo,
the
Paramount
Global
special
committee,
Paramount
Global,
and
Skydance’s
consortium
declined
to
comment.

One
significant
hurdle
that
remains
is
Paramount
Global’s
renewal
agreement
with
Charter
Communications
for
CBS
and
its
cable
networks.
That
deal
is
relevant
to
the
value
of
Paramount
Global,
which
could
take
a
hit
if
Charter
drops
the
networks
or
agrees
to
a
lower
carriage
rate,
the
people
said.

The
deadline
for
that
agreement
is
April
30.
Paramount
Global
reports
first-quarter
earnings
one
day
earlier,
on
April
29.

Paramount
Global
is
still
dependent
on
its
traditional
TV
business,
which
accounts
for
about
two-thirds
of
the
company’s
total
revenue.

There
are
signs
Charter
could
prove
to
be
a
tough
negotiator
with
Paramount
Global:
Last
year
the
cable
provider,
the
second-largest
in
the
U.S.,
briefly

stopped
carrying
Disney’s
networks
when
renewal
negotiations
between
those
two
companies
faltered.
The
parties
reached
a
deal
10
days
later.

Paramount’s
cable
networks
are
far
less
popular
than
Disney’s
ESPN,
which
may
put
Bakish
in
a
position
of
weakness.

The
timing
of
the
renewal
and
the
deal
talks
set
up
an
awkward
dynamic,
where
Bakish,
who
would
ultimately
leave
the
company
under
a
Skydance
merger,
will
control
Paramount
Global’s
fate
with
Charter.

Thus
far,
Bakish
has
always
reached
renewal
deals
with
the
major
pay-TV
distributors
since
taking
over
as
CEO,
dating
back
to
his
time
running
Viacom,
beginning
in
2016.

Bakish
has
privately
argued
against
the
Skydance
deal
because
it
dilutes
common
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
move
forward
with
a
Skydance
deal,
arguing
it
gives
Redstone
a
massive
premium
for
her
controlling
shares
while
leaving
common
shareholders
out
in
the
cold.

Under
the
terms
of
the
deal,
nearly
50%
of
the
company
would
be
owned
by
Skydance
and
its
private
equity
partners,
CNBC

reported
April
5.
The
rest
of
the
company
would
be
owned
by
common
shareholders,
and
the
company
would
continue
to
trade
publicly.

“At
Paramount,
we’re
always
looking
for
ways
to
create
shareholder
value.
And
to
be
clear,
that’s
for
all
shareholders,”
Bakish
said

during
his
company’s
most
recent
earnings
call,
in
February.

Disclosure:
Comcast
is
the
parent
company
of
NBCUniversal
and
CNBC.