Shocking Twist: Shari Redstone Withdraws Support, Crashes Paramount Global Sale to David Ellison!

The planned sale of Paramount Global to Skydance Media, operated by David Ellison, has been called off following the lack of approval from its principal backer, Shari Redstone, after a period of extreme boardroom pressure and drama.

National Amusements Inc., the Redstone family’s investment organization, declared that it could not find “agreeable terms” with Skydance for the family’s majority stakes in the entertainment company that owns CBS, Comedy Central, Nickelodeon, and Paramount Pictures, the movie studio on Melrose Avenue.

The family announced, “NAI appreciates Skydance for their months of efforts in trying to make this possible transaction happen, and looks forward to continued, successful production collaboration between Paramount and Skydance.” Paramount studio’s major franchises, including “Mission: Impossible” and “Top Gun,” are co-produced by Skydance.

Redstone appears committed to retaining the media company her family has controlled since 1987, despite its financial struggles and the entertainment industry’s volatility as consumers transition from traditional TV channels to streaming services.

A transaction with Skydance seemed plausible, but the successors of the late media mogul Sumner Redstone (Shari’s father) had struggled with the decision to let go of Paramount, which has always been viewed as a precious asset, even when its stock was at an all-time low. The company’s value has decreased by about two-thirds over the past five years.

National Amusements voiced its support for Paramount’s newly appointed executive trio serving in an “office of the CEO”: division leaders George Cheeks, Chris McCarthy, and Brian Robbins. It also endorsed their business plan, which includes cost-cutting, and the board’s efforts “to explore opportunities to enhance value creation for all Paramount shareholders.”

Paramount’s shares dropped by 8% to $11.04 on Tuesday.

Redstone’s decision was made just as Paramount Global’s independent board members were about to vote on Ellison’s proposed $8-billion takeover of the media company. David Ellison is the son of Larry Ellison, the billionaire tech tycoon and co-founder of software company Oracle Corp.

There had always been disagreements among Paramount’s board members. Some were against the two-phase transaction, believing it would give the Redstone family a premium for their shares at the expense of regular investors. Yet, the committee of independent board directors had reached an informal agreement with Skydance about 10 days ago.

The committee had not made a formal recommendation on the deal to Paramount’s full board.

National Amusements had requested the committee to make its recommendation before the company’s annual shareholders meeting last week, but that deadline passed. The holding company had hoped for a larger Paramount board to consider the transaction, but the investor meeting marked the end of the terms for four directors. This left just six board members to deliberate on the significant transaction.

Just before the committee vote, National Amusements informed the group that it would not approve the deal. National Amusements possesses 77% of Paramount’s voting shares.

The unexpected turnaround happened after Skydance and its backers, RedBird Capital Partners and private equity giant KKR, had reached an agreement late last week with National Amusements representatives on the financial terms of the deal, according to insiders who were not authorized to comment.

This breakthrough occurred after Skydance made efforts to make the deal more appealing and give nonvoting shareholders the chance to leave the company at a slight premium.

However, this action decreased the amount of cash offered to the Redstones, which upset the family matriarch, according to insiders close to the transaction.

Redstone had also requested that other shareholders, including nonvoting stock owners, be allowed to have a say in the proposed sale. The Skydance group refused, the informed sources said.

In recent weeks, Redstone received proposals from potential buyers for National Amusements and its controlling Paramount shares. Both offers were higher than the amount that National Amusements would have received as part of the Skydance bid.

Edgar Bronfman Jr., a former top executive at Seagram and Warner Music, and Hollywood producer Steven Paul (“Ghost in the Shell,” “Baby Geniuses”), have separately expressed their interest in buying National Amusements, according to two people close to the matter.

However, any deal with Bronfman, who is backed by Bain Capital, would be contingent on him performing due diligence. The former entertainment executive and liquor scion, who urged his family to acquire Universal Studios Inc. before selling it to France’s Vivendi over two decades ago, has proposed paying more than $2 billion for the Redstone firm.

Redstone is keeping her options open, the knowledgeable sources said.

Despite the initial momentum for the Skydance deal, it recently became clear that it was on unstable ground. Two sources confirmed earlier Tuesday that the lead independent director, Charles Phillips, was long opposed to the Skydance deal and was expected to vote against it.

Phillips, a former president of Oracle, had made his views known to Redstone, a second informed source said.

Redstone believed the Ellison proposal was the best viable option to preserve the media company. The family didn’t want to see Paramount broken apart, which would have been the strategy of another suitor: Apollo Global Management and Sony Pictures Entertainment. That group’s proposed $26-billion bid lost momentum as the Skydance deal appeared to be the preferred choice.

The deal’s tensions have been a recurring issue for the board throughout the year. In April, Paramount Chief Executive Bob Bakish, who opposed the Ellison deal, was ousted.

Corporate governance experts had indicated that the contentious transaction would likely result in shareholder lawsuits due to the Redstones’ influence in the company.

The Wall Street Journal first reported the deal’s collapse. Puck’s Matt Belloni first reported news of the meeting and Phillips’ opposition.