Paramount Global and Skydance Media are making progress on a deal that may merge the media corporations and buy out controlling shareholder Shari Redstone, people acquainted with the matter say.
Paramount Global's special committee, which is answerable for accepting or rejecting deals, and David Ellison's Skydance Media, backed by private equity firms KKR and RedBird Capital Partners, are narrowing down the query of how and the way much the assets of Skydance can be valued in a merger. Equity can be added to the corporate as a part of a recapitalization, the people told CNBC.
The sides are near agreeing on a price for Skydance, said the people, who asked to not be identified since the discussions are private. The entertainment company can be valued at about $5 billion and would merge with Paramount Global, it said. Skydance CEO Ellison and the private equity firms plan to lift about $4.5 billion to $5 billion in latest equity, the people said; Part of that — about $2 billion — can be used to pay Redstone, and one other significant slice can be used to pay down debt.
The buyers would like to finish the deal in May, people said. Three of the people said Paramount Global was slow to supply data to the Skydance consortium during due diligence, barely pushing back the timeline for a deal. The exclusivity window for merger talks ends May 3, however the Skydance consortium wants to increase it by two weeks, the people said.
Skydance plans to call Ellison as CEO of Paramount Global and former NBCUniversal CEO Jeff Shell as president, two of the people said. Paramount's current CEO, Bob Bakish, can be leaving the corporate, the people said.
Separately, private equity firm Apollo Global Management and Sony have held preliminary discussions about collaborating on a deal that may buy out all of Paramount Global's shareholders at a premium, in accordance with people acquainted with the matter. The special committee has not received specific details in regards to the offer and doesn’t consider it a competitive offer to Skydance, two of the people said.
Still, the committee had more details about an initial offer from Apollo, which it ignored in favor of exclusive discussions with Skydance, one in all the people said. The special committee favored Skydance's offer over Apollo's partially since it offered shareholders future upside by keeping the corporate public with a cleaner balance sheet, the person said.
Spokespeople for Apollo, the special committee of Paramount Global, Paramount Global and the Skydance consortium declined to comment.
Last big hurdle
Paramount Global's renewal agreement with Charter Communications for CBS and its cable networks stays a significant hurdle. That deal is relevant to Paramount Global's value, which could take successful if Charter abandons the networks or agrees to a lower carriage rate, the people said.
The deadline for this agreement is April thirtieth. Paramount Global reports first quarter results a day early, on April twenty ninth.
Paramount Global continues to depend on its traditional TV business, which accounts for about two-thirds of the corporate's total revenue.
There are signs that Charter could prove a tricky negotiator with Paramount Global: Last 12 months, the cable provider, the second-largest within the U.S., was briefly stopped carrying Disney's networks when renewal negotiations between these two corporations failed. The parties reached an agreement ten days later.
Paramount's cable networks are far less popular than Disney's ESPN, which could put Bakish in a weak position.
The timing of the renewal and contract negotiations created a clumsy dynamic through which Bakish, who would ultimately leave the corporate in a Skydance merger, will control Paramount Global's fate with Charter.
To date, Bakish has consistently signed renewal deals with major pay-TV distribution partners since taking up as CEO, dating back to his time leading Viacom starting in 2016.
Bakish has privately opposed the Skydance deal since it dilutes common shareholders, people acquainted with the matter say. Several Paramount Global investors have also publicly written letters to the corporate's board urging directors not to maneuver forward with the Skydance deal, arguing that it is going to give Redstone an enormous premium for his or her majority stake and leave common shareholders out within the cold .
Under the terms of the deal, nearly 50% of the corporate can be owned by Skydance and its private equity partners, CNBC reported April 5. The remainder of the corporate can be owned by common shareholders and the corporate would proceed to be publicly traded.
“At Paramount, we are always looking for ways to create shareholder value. And to be clear, this applies to all shareholders,” Bakish said during his company's last earnings announcement, in February.
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