What’s Next For Paramount After Skydance Merger Talks Fail

When David Ellison’s Skydance made a play for Paramount last fall it was how and when (not if) Shari Redstone would tie the knot. Paramount and Skydance worked together. He valued the studio and its crown jewel of a backlot and planned to keep the company together. He was offering her a nice bundle of cash for her stake in National Amusements.

They talked, and talked, and talked. Potential suitor Warner Bros Discovery faded away, as did Byron Allen, who made an actual offer for the company. Par and Skydance entered an exclusive negotiating period for the month of April. When the lock-up ended with no deal, doubt crept in. Sony jumped into the mix. Yet the two sides continued talking intensely up through this past weekend.

But Redstone, whose family holding NAI controls about 80% of Skydance, always had the last word, and the last word was no. She waved goodbye as National Amusements noted that the two sides were unable to find “mutually acceptable terms.” The stock dipped today on the news.

There are a number of reasons why things collapsed, depending on who’s talking. Deadline hears that all of the deal’s economic terms were set but other issues were not, like seeking consent for the deal from a “majority of the minority” of shareholders not named Redstone. Redstone wanted to, Ellison, not surprising, did not.

“I wouldn’t have done it either if I were him,” said one Wall Streeter. “They probably would have voted no.”

Deadline hears that Paramount may have found Skydance financials lacking and its valuation high. The deal called for Skydance to pay Redstone $2.25 billion outright for NAI and then merge with Paramount in a deal that valued Skydance at $4.75 billion.

Another big deal point: We hear that both sides couldn’t agree on how Skydance would operate the company through the regulatory process.

There’s been speculation that it’s hard for Redstone to relinquish mogul status; or her family company; or that she wanted more for her stake; or that maybe she just didn’t like Ellison, although there was a sense that they were somewhat simpatico at first. Going forward, Skydance doesn’t have any kind of slate financing deal in place on the Melrose lot, however he had dibs to step and co-finance such feature IP as the Mission: Impossible, Top Gun and Star Trek movies.

Redstone will likely sit tight now, pursuing deals that buy her out but don’t involve a merger — cleaner and simpler. Edgar Bronfman Jr. with Bain behind him is exploring an offer, as is producer Steven Paul with some deep-pocketed partners.

But she also may not do anything immediately, choosing to pay down debt, raise the company’s value and try to sell it again at a later date and take a shot on the new CEO troika of Brian Robbins, George Cheeks and Chris McCarthy. For in them is the confidence that they’ll do what former Paramount Global CEO Bob Bakish didn’t do: sell off assets such as BET and Showtime.

At the annual shareholders meeting last week, Robbins, Cheeks and McCarthy laid out a path to divest non-core assets, unlock the value of content and possibly find a joint venture partner for streaming service Paramount+. As unorthodox as three chiefs seem, they are seasoned executives and Redstone seems to wants to keep them in place for now.

Sony is still looking at the books for a possible deal but we’re hearing that doesn’t appear to have much traction given the regulatory hurdles of a Japanese company taking interests in a U.S. broadcast company.

Inside Paramount Global, there was a sigh of relief today. Jeff Shell was set to step in for Skydance to run the combined company under Ellison. Division heads and other execs would also have been displaced.

Investors were disappointed today, bidding the stock down by about 8% at the close and by another 1% after. They didn’t love the Ellison deal, but aren’t sure what comes next.

“Any plan, and any potential buyer of Paramount, will have to contend with a company whose mix of assets presents in many ways a challenged hand for navigating the shifting winds of media,” said analyst Robert Fishman of MoffettNathanson.