Skydance extends final offer to Paramount as merger talks stick on a possible shareholder vote

In
what
could
easily
be
a
plotline
from
HBO’s
hit
show “Succession,”


Paramount
Global
is
replacing
Chief
Executive
Officer
Bob
Bakish
with
a
cohort
of
existing
division
heads,
the
company
announced
Monday.
It’s
a
chessboard-altering
move
designed
to
accelerate
the
company’s
future
—
one
way
or
another,
according
to
people
familiar
with
the
matter.

Paramount
announced
Bakish’s
departure
before
reporting
first-quarter
earnings.
He’ll
be
replaced
by
a
trio
of
executives
in
what
the
company
is
calling
the “Office
of
the
CEO.”

The
decision
to
remove
Bakish
as
CEO
comes
as
Paramount
Global
closes
in
on
a
merger
agreement
with
Skydance
Media.
His
departure
throws
into
question
Paramount’s
near-term
future
as
a
standalone
company,
which
could
help
force
through
a
merger
agreement.

The
Skydance
consortium,
which
includes
private
equity
firms
KKR
and
RedBird
Capital,
has
proposed
a
deal
with
new
terms
to
the
Paramount
special
committee
as
a “best
and
final”
offer,
according
to
people
familiar
with
the
matter.
Skydance
is
waiting
to
hear
back
from
the
special
committee
on
whether
it
will
accept
the
offer,
said
the
people,
who
asked
not
to
be
named
because
the
discussions
are
private.

As
part
of
the
new
deal
on
the
table,
controlling
shareholder
Shari
Redstone
may
take
less
than
$2
billion
for
her
controlling
stake
in
Paramount
—
lower
than
what
Skydance
had
initially
offered
her.
The
Skydance
consortium
is
contributing
additional
capital
to
pay
common,
Class
B
shareholders
at
a
nearly
30%
premium
to
the
undisturbed
trading
price
of
about
$11
per
share,
according
to
people
familiar
with
the
new
deal.
In
total,
Redstone
and
Skydance
would
contribute
$3
billion,
with
the
vast
majority
going
to
Class
B
shareholders,
the
people
said.

Skydance’s
valuation
as
part
of
the
deal
remains
around
$5
billion,
the
people
said.

A
number
of
large
common
shareholders,
including

Gamco
Investors,
Ariel Investments,
Matrix
and

Aspen
Sky
Trust have
publicly
criticized
the
deal,
arguing
it
destroys
value
for
common
shareholders.

A
potential
dealbreaker
is
whether
to
hold
a
so-called “majority
of
the
minority”
vote
on
the
deal,
which
would
allow
common
shareholders
the
chance
to
potentially
sway
the
outcome.
The
special
committee
tasked
with
evaluating
the
offer
would
also
be
the
party
to
put
the
deal
up
for
such
a
vote.

Skydance
believes
it
has
met
all
of
the
conditions
from
the
special
committee
and
is
prepared
to
walk
from
the
deal
if
such
a
vote
is
mandated
given
the
improvements
it
has
made
as
of
Monday,
sources
tell
CNBC.
Adding
a
vote
post-negotiation
is
a
non-starter,
one
of
the
people
said.

Forcing
such
a
vote
now
would
change
the
structure
of
the
deal
for
Skydance,
which
is
already
paying
a
significant
premium
to
Redstone
for
her
controlling
stake
and
paying
Class
B
shareholders,
said
two
of
the
people
familiar
with
the
Skydance
consortium’s
thinking.

Spokespeople
for
Skydance
and
Paramount
Global’s
special
committee
declined
to
comment.
A
spokesperson
for
National
Amusements,
which
houses
Redstone’s
stake,
said
the
decision
on
whether
to
take
the
deal
lies
with
the
Paramount
Global
special
committee.

“National
Amusements
specifically
requested
that
the
Paramount
board
form
a
special
committee
to
exercise
their
dependent
judgment
in
considering
a
potential
transaction
with
Skydance,”
a
National
Amusements
spokesperson
said
in
a
statement
provided
to
CNBC. “National
Amusements
has
no
role
on
the
committee,
and
we
respect
the
committee’s
process
and
ultimate
decision
on
whether
the
Skydance
deal
presents
an
attractive
transaction
for
Paramount
and
whether
they
want
to
continue
to
move
forward.”

Paramount
Global
shares
jumped
about
3%
during
regular
trading
Monday.

By
removing
Bakish,
Redstone
and
the
Paramount
Global
board
are
now
throwing
the
status
quo
into
chaos.
The
company
will
no
longer
have
a
singular
leader
or
a
clear
go-forward
strategy.
Redstone
may
be
trying
to
force
common
holders
to
choose
a
sale
by
effectively
destabilizing
the
company
without
one.

Exclusivity
talks
with
Skydance
are
set
to
end
May
3.
CNBC

reported
Thursday
that
Skydance
was
inching
toward
valuation
terms
but
wanted
a
two-week
extension
on
exclusivity,
which
now
may
be
moot
with
its
latest
best
and
final
offer.

A
joint
bid
by
private
equity
firm
Apollo
Global
and
Sony
could
serve
as
a
white
knight
if
the
special
committee
votes
down
the
Skydance
deal.
The
New
York
Times

reported
earlier
in
April
that
the
two
parties
have
had
preliminary
talks
on
a
deal.
Still,
it’s
unclear
if
Redstone
would
consider
selling
to
a
large
private
equity
firm,
which
would
likely
break
up
the
company
over
time.
Redstone
chose
to
ignore
Apollo’s
earlier
offer
in
favor
of
negotiating
with
Skydance.

Meanwhile,
Paramount
has
an
important
carriage
renewal
deal
with
U.S.
cable
company
Charter
Communications
in
the
coming
days,
though
the
deadline
could
be
extended.
Bakish
has
been
deep
in
negotiations
with
Charter.
It’s
unclear
how
his
removal
will
affect
those
negotiations,
which
will
play
a
large
role
in
valuing
the
company
moving
forward.