Shari Redstone, Paramount End Merger Talks With Skydance As Two Sides “Not Able To Reach Mutually Acceptable Terms”

After months of negotiations, Paramount‘s controlling shareholder Shari Redstone has broken off merger talks with David Ellison‘s Skydance.

National Amusements has “not been able to reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI,” said the Redstone family trust that controls Paramount. 

“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.

“NAI supports the recently announced strategic plan being executed by Paramount’s Office of the CEO as well as their ongoing work and that of the Company’s Board of Directors to continue to explore opportunities to drive value creation for all Paramount shareholders.”

The two sides have been deep in discussions during and after a one-month exclusive negotiating period in April and Redstone at one point had favored the deal, which would have paid her a premium, and kept the businesses together, at least initially. The transaction was for Skydance to acquire Redstone’s family holding company NAI, which controls Paramount, and then see Par and Skydance merge.

As of this weekend talks were intense but there were a few major sticking points, one said to be over which party party would assume legal liabilities in the case of shareholders lawsuits.

Paramount Global stockholders vocally disliked the deal from the start and threatened to sue. Skydance, backed by Larry Ellison and Gerry Cardinale’s RedBird Capital, revised the deal several times to sweetened the pot for them, but they still weren’t enamored.

Meanwhile, a few other bidders had emerged to acquire Shari Redstone’s controlling stake in a deal that would be a change of control of the publicly traded company, but not a merger. Producer Steven Paul put together a group of deep-pocketed investors and is interested. And former Universal chief Edgar Bronfman, Jr., backed by Bain Capital, is also looking at a deal. Paul at least, a friend of Redstone, was regarded as a stalking horse by many — a bidder encouraged by a company, in this case Paramount, to lob an offer and pressure other parties.

With Skydance out, Paul and Bronfman are now higher profile. The offers are only for Restone’s controlling stake in Paramount, which would be the simpler way for her to go.

Sony and private equity giant Apollo early on had considered a joint $26 billion bid for the entire company, which would have been another way and one beloved by stockholders, but scaled that back and Sony is still doing due dilligence (an examination of Paramount books, like Skydance did) for some kind of smaller transaction.

Paramount, which has struggled due to cord-cutting and linear TV’s difficulties, has been the subject of M&A talk since last fall. Skydance, which has co-financed a number of film and TV projects with Paramount Pictures, was the first outside entity to emerge as a legitimate suitor. 

The process has been messy and very public. Amid all of the takeover speculation, former Paramount CEO Bob Bakish departed in April, weeks before four board members stepped down. Reports tied the directors’ exits to frustration with the Skydance deal. Bakish was replaced by the office of the CEO referred to above and comprised of top Paramount executive Brian Robbins, George Cheeks and Chris McCarthy.

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