Paramount Global To Merge With Skydance; Stock Up

(RTTNews) - Media major Paramount Global and Skydance Media, founded by David Ellison, son of Oracle founder Larry Ellison, announced late Sunday their agreement to merge in an all-stock transaction, to form New Paramount at an enterprise value of around $28 billion.

In pre-market activity on the Nasdaq, Paramount Global shares were gaining around 4.7 percent to trade at $12.37. Its market value was $8.22 billion as of Friday.

Following the merger, Ellison plans to reposition Paramount to improve profitability, foster stability and independence for creators, and enable more investment in digital platforms.

The companies have been engaged in merger talks for months, and will be combined in a two-step transaction, including the acquisition of Paramount parent National Amusements, Inc. or NAI, and subsequently a merger of Skydance and Paramount Global.

The completion of the deal is not subject to any financing condition. The transaction is anticipated to close in the first half of 2025.

Shari Redstone, Chair of Paramount Global and Chair, President, and CEO of NAI, said, "In 1987, my father, Sumner Redstone, acquired Viacom and began assembling and growing the businesses today known as Paramount Global... Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king. Our hope is that the Skydance transaction will enable Paramount's continued success in this rapidly changing environment."

NAI, which holds around 77 percent of the Paramount Class A shares, has agreed to the transaction. No further stockholder approval is required.

In the first process, Skydance Investor Group, comprised of the Ellison Family and RedBird Capital Partners, will invest over $8 billion in New Paramount and to acquire NAI. Skydance IG will invest $2.4 billion to acquire NAI for cash and $4.5 billion for the stock/cash merger consideration to be paid for publicly traded Class A shares and Class B shares. It will also invest $1.5 billion of primary capital to be added to Paramount's balance sheet.

Under the second process, Skydance will merge with Paramount in an all-stock deal that values Skydance at $4.75 billion. Existing Skydance equity holders will receive 317 million Class B Shares valued at $15 per share.

Paramount Class A Stockholders will receive $23 per share in cash/stock election, and Class B Stockholders will receive $15 per share in cash/stock election.

The merger consideration represents a 48 percent premium to the price of the Class B stock as of July 1, and a 28 percent premium to the Class A stock on the same date.

Following the deal closure, Skydance Investor Group will own 100 percent of New Paramount Class A Shares and 69 percent of outstanding Class B shares, or around 70 percent of the pro forma shares outstanding.

New Paramount will be led by David Ellison, the founder and Chief Executive Officer of Skydance. He will be the Chairman and Chief Executive Officer of the combined company, while Jeff Shell, Chairman of RedBird Sports & Media and former CEO of NBCUniversal, will be President.

Following the deal closure, only Skydance IG will hold Class A shares. Class B stockholders will own around 30 percent of the outstanding equity of New Paramount and Skydance IG will own approximately 70 percent of the outstanding equity of New Paramount.

By continuing to own shares of the new combined company, Paramount Class B stockholders will have the opportunity to participate in the new company's long-term value creation potential.

The merger agreement includes a 45-day go shop period, allowing Paramount's Special Committee, which was formed in January, to actively solicit and evaluate alternative acquisition proposals.

Skydance, a longtime production partner to Paramount, reportedly began merger talks with Paramount parent NIA in last December.

Earlier, there were reports that Paramount held merger talks with media firm Warner Bros. Discovery Inc. Further, Sony Pictures Entertainment, affiliated to Japanese conglomerate Sony Group Corp., and Apollo Global Management reportedly had proposed a $26 billion all-cash buyout offer to take entertainment giant Paramount private.

Paramount, which has been struggling with losses and hefty debt, in April reported a first-quarter net loss of $554 million or $0.87 per share, narrower than last year, with increased revenues. Paramount+ subscribers reached more than 71 million, with 3.7 million net additions in the quarter.

In comparison, video streaming giant Netflix Inc. added 9.3 million new subscribers in its first quarter, to reach total subscribers to 269.60 million.