Redstone Family’s Decision Could Upend Skydance & Paramount Deal! What’s Next?

For over a week, Paramount Global has been on the verge of accepting a bid from David Ellison for the control of the embattled media company. However, a significant question remains: will the deal get the green light from Paramount’s controlling shareholder, Shari Redstone, and her three children?

Individuals close to the negotiation process indicate that Ellison’s Skydance Media, along with its financial backers, are nearing the conclusion of a deal that Ellison initiated last summer. On Monday, after a weekend of intense discussions, lawyers for both parties—Skydance and the Redstone family—had reached an agreement on several major unresolved issues, but were still ironing out the final details of the deal, according to three informed sources who requested anonymity due to the sensitive nature of the discussions.

The protracted and public nature of the bidding process, which has been drawn out by a six-month review from Paramount’s board of independent directors, has been further complicated by the recent interest from two potential buyers for the Redstone family’s investment entity, National Amusements Inc., which owns 77% of Paramount’s voting shares.

The emergence of these two potential new bidders, who seem willing to offer more than what the Skydance proposal includes, has ramped up the pressure on the descendants of the late media tycoon Sumner Redstone.

Former high-ranking Seagram and Warner Music executive Edgar Bronfman Jr., and Hollywood producer Steven Paul, known for films such as “Ghost in the Shell” and “Baby Geniuses,” have separately expressed interest in acquiring National Amusements, according to two of the sources. Bronfman’s and Paul’s interests were first reported by the Wall Street Journal.

However, any deal with Bronfman, who is supported by Bain Capital, would depend on a thorough due diligence process, according to one of the sources. The former entertainment executive and liquor heir—who previously persuaded his family to buy Universal Studios Inc. before selling it to France’s Vivendi over two decades ago—has proposed a payment exceeding $2 billion for the Redstone firm. On another note, Paul has been seeking financial backers to make a bid of roughly $3 billion for National Amusements.

The structure of Ellison’s Skydance deal substantially differs from those proposed by Paul and Bronfman.

Representatives of Paramount and Redstone have declined to comment on the matter.

Ellison’s proposed $8-billion takeover is a two-tier process. Initially, his group would acquire National Amusements, providing the Redstone family an exit from the movie industry after more than 80 years.

The current Skydance proposal earmarks $2.3 billion for the purchase of National Amusements. Of this amount, nearly $600 million would be allocated to settle NAI’s debt, which includes loans procured by the late mogul. His descendants would receive approximately $1.7 billion, according to the sources.

Ellison’s plan is to merge his smaller Skydance movie, TV, and animation company, based in Santa Monica, with Paramount and run the combined entity as its CEO. The Skydance deal is structured in a way that the majority of the funds would go to Paramount and its shareholders.

This phase of the deal requires the approval of Paramount’s board, which is why Ellison and his team had to negotiate satisfactory terms with the company’s directors not affiliated with the Redstones. This process commenced last December.

Ellison’s bid is backed by RedBird Capital Partners, private equity firm KKR, and his father, Larry Ellison, the co-founder of software giant Oracle Corp.

Their offer includes a provision to set aside $4.5 billion for Paramount’s nonvoting shareholders, who could sell some of their stocks at $15 per share. An additional $1.5 billion would be injected into Paramount’s beleaguered balance sheet, enabling the company to reduce some of its substantial debts. While negotiating with Paramount board members, the Ellison group increased its offer twice, in part to appease nonvoting shareholders who were unhappy that the Redstone family would receive a premium for their shares.

Paramount’s stock closed Monday at $11.98 per share, virtually unchanged from the previous trading day.

Analysts have described the sale of Paramount as one of the most convoluted media deals ever.

Charles Elson, a corporate governance expert at the University of Delaware, attributes the issue to the company’s two-class stock structure.

“This setup leads to high conflict and significant problems,” Elson said. “The dual-class shares eliminate some of the checks and balances that a regular corporation would have. There’s really no check on [Redstone’s] decision-making.”

Once a consensus is reached by the lawyers from both sides, the deal will be presented to National Amusements, whose board of directors includes Shari Redstone, her three adult children, and several long-term advisors. The inheritance is expected to be divided among Sumner Redstone’s five grandchildren, according to his trust documents.

The deal also needs to be ratified by Paramount’s full board, which includes Redstone as its non-executive chair.

The timing of the deal is a significant concern for the family, given the lackluster performance of Paramount’s shares.

Last year, Paramount reduced its dividend to shareholders, causing the stock to plummet. The Paramount dividend was a significant source of income for National Amusements.

A decade ago, shares of Paramount—then known as Viacom—were trading above $70 per share, making the Redstone family multibillionaires. However, management missteps and the industry’s transition to streaming have severely affected Paramount Global (the company formed from the merger of Viacom and CBS). The entertainment company is currently valued at $8.3 billion—roughly a third of its value just five years ago.