Paramount Merger Saga Continues: Go-Shop Period Extended As Edgar Bronfman Vies With Skydance, Improving His Offer To $6B

Paramount is taking more time before an official handshake with Skydance, using an extra 15 day allotted in their merger contract to explore another bid – a surprise, last-minute offer from Edgar Bronfman Jr. that the Seagram mogul has just sweetened.

Bronfman originally submitted an offer worth $4.3 billion on Monday night. The updated version includes $1.7 billion to cash out some of Paramount’s other shareholders, who mostly hold Class B nonvoting stock, at $16 a share. That’s higher than the $15 Skydance offered, but Skydance has offered to buy more shares, up to $4.5 billion worth.

Bronfman’s bid includes the $400M kill fee which Skydance stipulated should Paramount opt to go with another suitor.

The first go-shop period ends tonight at 11:59PM ET. Paramount is allowed under the deal to have two 15-day extensions.

The decision to extend the 45-day go-shop period came just before the pair’s self-imposed deadline of 11:59 pm ET tonight. So Par’s special board committee, which has met several times today, will be taking a very close look at the bid from the heir to the Seagram liquor fortune and former media executive.

Bronfman assembled about 20 investors, from Fortress group to former child actor turned crypto magnate Brock Pierce to high net worth individuals and financiers for a $4.3 billion package. His offer letter indicated that the group needs a few more days to nail down financing, Deadline hears, but had enough juice to merit consideration.

Charles Phillips, the head of Paramount’s special board committee tasked with evaluating offers, is said to have nudged Bronfman’s bid along. It’s the latest frustration for Skydance, whose circa $8 billion merger agreement with Paramount unveiled July 7 included a 15-day extension to explore a rival bid, and another 15 days to nail it down.

If it gets that far, Skydance would have the right to counter. However, the two deals are structurally very different.

Both Skydance and Bronfman agreed to pay Shari Redstone $2.4 billion for her controlling stake in Paramount through special Class A voting shares. Both parties also plan to inject $1.5 billion to help Par shore up its finances and pay down debt. If Bronfman somehow emerges the winner, he’d owe Skydance a $400 million breakup fee.

A big difference is that David Ellison’s Skydance plans to spend $4.5 billion to buy out the few Class A holders besides Redstone, and about half of munch more numerous Class B shares at, respectively, $23 and $15 a share. That’s a premium to the current share price and stockholders like it. Bronfman may also raise funds for a partial cash-out for stockholders but if an how much is not yet clear.

Another big structural element is an actual merger with Paramount buying Skydance in a $4.75 billion all-stock deal. Shareholders like that less. It’s a very high valuation for Skydance and it would dilute their holdings. However, at the end of the day Paramount will be new, bigger company with deeper content and tech chops backed by Oracle co-founder Larry Ellison, one of the world’s richest men. Gerry Cardinale’s RedBird Capital is a major investor as well. Jeff Shell would run the combined company under Ellison.

Wall Street was a bit mystified by what’s seen as an uphill fight for Bronfman. “This is a narrative runs counter to wanting to leave Paramount in the safe hands of a family that has the balance sheet to nurture and properly invest in Paramount’s assets for decades to come,” said Rich Greenfield of Lightshed Partners.

There’s also been speculation that Bronfman’s non-U.S. investors, including a Kazakh businessman and a U.K. investment firm, could raise foreign ownership concerns.

Messy Merger Process

Redstone first began mulling various M&A options late in 2023, as the exigencies of funding a major streaming operation while also managing a portfolio filled with challenged TV and film assets became fully apparent. Paramount stock also had sunk to less than one-third of its value as of December 2019, which is when the merger of Viacom and CBS closed, creating Paramount Global.

The process of landing on a buyer has traveled a winding road in the nine months or so from the time the first serious discussions were held. A number of major players, from Warner Bros. Discovery’s David Zaslav to Barry Diller to private equity giant Apollo Global Management and Sony Pictures Entertainment, joined the chase. After Skydance and Paramount announced their proposed combination in July, most suitors dropped their pursuits. 

The dual-class structure of Paramount, along with the fact that Redstone has controlled nearly 80% of Class A shares but just 10% of the company’s total equity, created headaches for dealmakers. Skydance revised its offer multiple times and was poised to announce an agreement with Paramount in June, only to have Redstone withdraw at the 11^th hour.

Along the road to a new corporate configuration, running the company has also proven to be a more complex undertaking. Bob Bakish, a onetime favorite of Redstone who was appointed CEO of Viacom in 2015 and then led Paramount starting in 2019, fell out with her over his concerns about the Skydance deal and was ousted last April. An “Office of the CEO” consisting of veteran execs George Cheeks, Chris McCarthy and Brian Robbins, was put in place. The trio then announced dramatic cutbacks, including $500 million in annual cost reductions and the layoff of 15% of the company’s U.S. workforce.

In addition to the belt-tightening, Paramount also acknowledged a fundamental shift in the media empire it had assembled over decades, from the time when Shari’s father, Sumner Redstone, was running the company. It booked a $6 billion write down on its cable networks, acknowledging the wages of cord-cutting and changes in viewer habit. Flagship streaming service Paramount+, meanwhile, showed a profit in the most recent quarter, with full-year profitability the goal by 2025. The outlet also shed 2.8 million subscribers in the quarter, however, due to the end of a “hard-bundle” deal in South Korea, illustrating the challenge of building a global direct-to-consumer service capable of competing against Netflix.

The co-CEOs told Wall Street analysts on the quarterly earnings call that it was “business as usual” despite the merger saga unfolding on the top level. They have said they will be given the latitude to pursue strategic transactions during this interim period. Especially on the international front, McCarthy said on the quarterly call that the leadership would take a “thoughtful approach.” Options, he said, include “strategic partnerships with maybe platforms who already have a great tremendous amount of reach and a platform, in which case we’ll be reducing our cost by not having to have our own platform.”

Another scenario could be “a joint venture with one or more SVOD players, in which case we could get greater scale, increase long-term value, and drive greater profits.” The company is already a partner with NBCUniversal in Sky Showtime, a JV operating in more than a dozen territories across Europe.