Last (Sky)Dance? Last Chance For Love?

Life seems to be an endless array of ironies at times.  Of all the days I could have chosen to make a return to the Paramount lot that I love so much (thank you yet again, Uncle Tommy), it’s one that will follow a potentially monumental day for the company.  By the time I get there, white smoke may billow all the way from its Times Square offices in New York straight into the iconic water tower in Hollywood.  But there is also apparently a strong possibility it could be accompanied by the remnants of more incideniary explosions.

At 9 am ET the annual shareholders’ meeting will begin.  As DEADLINE’s Dade Hayes reported yesterday, the event was already set to be a significant one, with the three executives sharing the Office of the CEO laying out their strategic plans for the company.  But CNBC’s Lillian Rizzo and Alex Sherman, along with a perpetually imbedded colleague, dropped a more significant story yesterday that no doubt will be on the lips of those in the room along with hopefully chilled orange juice and non-stale croissants:

Paramount and Skydance have agreed to terms of a merger, CNBC’s David Faber reported Monday. A deal could be announced in the coming days, he said.

A Paramount special committee and the buying consortium — David Ellison’s Skydance, backed by private equity firms RedBird Capital and KKR — agreed to the terms. The deal is awaiting signoff from Paramount’s controlling shareholder, Shari Redstone, who owns National Amusements, which owns 77% of class A Paramount shares, Faber said Monday.

“We received the financial terms of the proposed Paramount/Skydance transaction over the weekend and we are reviewing them,” said a National Amusements spokesperson.

The deal currently calls for Redstone to receive $2 billion for National Amusements, Faber reported Monday. Skydance would buy out nearly 50% of class B Paramount shares at $15 apiece, or $4.5 billion, leaving the holders with equity in the new company.

Skydance and RedBird would also contribute $1.5 billion in cash to Paramount’s balance sheet to help reduce debt.

Following the deal’s close, Skydance and RedBird would own two-thirds of Paramount, and the class B shareholders would own the remaining third of the company, Faber reported. The negotiated terms were reported earlier by The Wall Street Journal.

The deal will not require a vote from the shareholders, which was part of the negotiations, Faber reported.

And at least one of those shareholders has already let it be known that they aren’t the least bit thrilled by this.  Per THE WRAP’s Benjamin Lindsay’s piece from last night:

Paramount shareholder Aspen Sky Trust decried reports of a Skydance agreement to acquire the media conglomerate on Monday as an “undervalued bid” that only benefits non-executive chair Shari Redstone “to the detriment of nearly all remaining shareholders.”

The firm, which owns approximately 6.57 million shares in the company, sent a third letter of opposition Monday, sent and signed by William W. Riley, Jr., Esq. on behalf of his client.

“Despite the vocalization of our concerns and those of similarly concerned shareholders, today it was widely reported that a merger agreement has been reached by Paramount Global and Skydance Media. Few details of the merger agreement are available to company shareholders, including my client,” the letter read.  The dilution of shareholder valuation to advance the position of a single shareholder with a position on the Board of Directors is a per se violation of the Board’s fiduciary duties to its shareholders,” the letter read. “Once the details of the deal are made available to the shareholder base, we would not be surprised to learn of additional violations of the law concerning this merger agreement.”

And in the middle of this love triangle is the conflicted and detached Redstone, who will likely not be in attendace, if for no other reason than the one offered by THE HOLLYWOOD REPORTER’s Alex Weprin:

(I)t is up to Redstone to approve the deal and move forward, or look at other options. Because Redstone’s National Amusements was recused from the board talks, it is just beginning to review the proposal.

And given the kind of scrutiny that the likes of Aspen Sky Trust are giving it, it’s incumbent upon Sharaleh to make sure every possible I is dotted and T is crossed.  Especially the I at the end of Shari and the T at the end of Paramount.

And Hayes added there could be other hiccups awaiting amidst the possibility of an official announcement and annointing today:

While Skydance’s offer has been sweetened multiple times, and a special committee of Paramount’s board of directors has reportedly given its thumbs-up, a few sticking points remain. Perhaps the biggest is indemnification, the official term for who would back the company if shareholders or other stakeholders decide to sue over the merger. In recent months, as Skydance and its backers, including RedBird Capital, have pursued a deal, the notion of Class B (non-voting) shareholders taking National Amusements CEO Shari Redstone to court has become a realistic threat. One source told Deadline Sunday night that it could potentially derail the deal, as could haggling over a “go-shop” provision that could enable Paramount and National Amusements to seek a better offer than that from Skydance.

Look, I’ve made no bones about my strong belief that the Skydance and Redbird management team offers a stronger potential for proven leadership to join the fray.  Jeff Shell is as talented a CEO as I’ve ever personally known, and David Ellison’s track record for identifying hits at Skydance has arguably been way better than those of the three-headed hydra Redstone has installed to babysit while she ponders.  Chris McCarthy brought back Jon Stewart.  George Cheeks brought back Hollywood Squares.  Brian Robbins didn’t bring back Dan Schneider.  Ellison brought back Top Gun.

Moreover, keeping Paramount intact enough to fight another day will ensure that thousands of jobs stay intact, that a direct pipeline of studio to distribution outlet is maintained, and that the Paramount lot won’t be turned into yet another big construction site for mixed-use high rises.  If you’ve driven in the area near Melrose and Gower lately, there’s already quite a few of those eyesores and obstacles that one has to negotiate around.

And just maybe, in the wake of the fact that Redstone has already go an awful lot of talented people just to get to this point, Shell and Ellison might realize that warm bodies, even consultants, will be needed to accomplish the aggressive goals they will need to set–or at least lay out a plan  to quiet the dissenters in their ranks.

It’s likely a longshot.  It’s arguably a pipe dream.  But I’d rather have a sliver of hope that some dancing of some kind will continue than none whatsoever.  And I suspect a lot of you, especially those who arent part of Aspen Sky Trust, are inclined to agree.

Until next time…

 

1 thought on “Last (Sky)Dance? Last Chance For Love?”

  1. Great piece, Steven Leblang. Your “Last (Sky)Dance? Last Chance For Love?” article is insightful and a really ‘News of the Day’ timely analysis of the increasingly likely potential merger between Paramount and Skydance.

    Its a balanced view of the situation, highlighting the significance of the annual shareholders’ meeting and the potential hurdles that may arise due to shareholder opposition and legal considerations.

    Your personal opinion on the leadership capabilities of Jeff Shell and David Ellison adds an interesting perspective to the discussion. Thx for a well-written, informative, and engaging read on the future of Paramount (and, inevitably, STAR TREK)..!! 😎👍

    Reply

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