Technology billionaire David Ellison’s months-long quest to win control of Paramount Global approached the finish line on Sunday, in a deal that marks a new chapter for the long-suffering media company that is the parent of one of Hollywood’s oldest movie studios.
Paramount Global’s board on Sunday approved an offer from Ellison’s Skydance Media and its backers to buy the Redstone family’s Massachusetts-based National Amusements Holdings, two sources close to the deal who were not authorized to comment said.
A Paramount spokesman declined to comment.
The Redstones’ voting shares in Paramount will be transferred to Skydance, giving Ellison, the son of Oracle Corp. co-founder billionaire Larry Ellison — a key backer of the deal — control of a media operation that includes Paramount Pictures, the CBS broadcast network and cable channels MTV, Comedy Central and Nickelodeon.
The proposal is worth $8.4 billion. multi-faceted treatment It also includes the integration of Ellison’s production company into the established media company, giving it greater leverage to compete in today’s media environment.
The deal, which makes Ellison a Hollywood mogul, was reached over the past two weeks, as Ellison and his financing partners renewed their efforts to win over the Redstone family and Paramount’s independent board members.
Read more: So the Paramount-Skydance deal is back on track. What happened and what happens next?
Redstone has long been favored. Ellison Show Several potential candidates have expressed interest in joining Paramount, believing the 41-year-old businessman has the ambition, experience and financial muscle to lift Paramount out of its slump.
But in early June, Redstone got scared and left suddenly. From Ellison’s deal — a move that surprised industry watchers and Paramount insiders because Redstone was the one who orchestrated the auction.
Within about a week, Ellison renewed his efforts to reach out to Redstone. He eventually convinced her to quit the entertainment company. Her family has controlled the company for nearly four decades. The sweetened deal also paid the Redstone family about $50 million more than what was proposed in early June. The full Paramount board, including the special committee of independent directors, approved the deal on Sunday, the two sources said.
Read more: David Ellison’s Journey from Trust Fund Kid to Media Mogul Bidding to Buy Paramount
Under the terms of the deal, Skydance and its financial partners Red Bird Capital Partners and private equity firm KKR have agreed to provide a $1.5 billion cash injection to help Paramount pay down its debt. The deal also includes $4.5 billion to buy out Paramount shareholders’ Class B stock.
The Redstone family will receive $1.75 billion for National Amusements, the company that owns the family’s Paramount Pictures and regional movie theater chain founded during the Great Depression, after paying off the company’s massive debts.
The proposed extradition signals the end of the Redstone family’s nearly 40-year reign as one of America’s most notorious and divisive media dynasties. Late Sumner Redstone National Amusements was once worth close to $10 billion, but theater closures due to the pandemic, last year’s Hollywood worker strikes and a heavy debt load have dented its fortunes.
The New York-based company has lost two-thirds of its value over the past five years. Its shares are now worth $8.2 billion based on Friday’s closing price of $11.81 per share.
These struggles forced Shari Redstone to abandon her beloved family legacy. Additionally, National Amusements was struggling to pay its debts, and high interest rates were worsening the Redstone family’s outlook.
Read more: Shari Redstone was ready to turn Paramount into a Hollywood comeback story. So what happened?
Paramount boasts some of the most historic brands in entertainment, including the 112-year-old Paramount Pictures film studio, known for such iconic films as “The Godfather” and “Chinatown.” The company owns television stations including KCAL-TV (Channel 9) and KCBS-TV (Channel 2). Vibrant cable channels such as Nickelodeon, TV Land, BET, MTV and Comedy Central have lost viewers.
The delivery process requires approval from federal regulators, a process that could take months.
In May, Paramount’s independent board committee said it would receive Competing bid worth $26 billion from Sony Pictures Entertainment and Apollo Global Management. The offer would have resulted in all shareholders retiring and Paramount’s debt being paid off, but Sony executives The company has become increasingly wary of acquiring a company that relies on traditional TV channels.
Earlier this year, Warner Bros. Discovery announced expressed interest In a merger or acquisition of CBS. However, that company has $40 billion in debt from previous deals and is in a similar position to Paramount. Media mogul Byron Allen has also expressed interest.
Many in Hollywood—film producers, writers, and agents—were in favor of the Skydance acquisition, believing it represented the best chance to keep Paramount as an independent company. Apollo and Sony were expected to split the venture, with Sony incorporating the film studio into its Culver City operations.
The second phase of the deal will see Paramount acquire Ellison’s Santa Monica-based Skydance Media, which produces sports, animation and games as well as television and film production.
Ellison is expected to take over Paramount as CEO. CEO Jeff ShellJohn Jordan, now a RedBird executive, may help run the operation. It’s unclear whether the Skydance team will retain the three division heads who currently run Paramount: Paramount Pictures CEO Brian Robbins, CBS President George Cheeks and Showtime/MTV Entertainment Studios President Chris McCarthy.
Skydance has an existing relationship with Paramount. It has co-produced every Mission: Impossible film since 2011’s Mission: Impossible — Ghost Protocol, starring Tom Cruise. It also backed Cruise’s hugely successful 2022 film Top Gun: Maverick.
Read more: Paramount Global is up for sale. Who’s buying it and how did we get here?
Ellison first approached Redstone about a deal last summer, and talks became Known in December.
Redstone had long viewed Ellison as a preferred buyer because the deal paid a premium to her family for their exit. She also liked the media mogul, believing he could become a next-generation leader who could take the company her father built to the next level, according to people familiar with her thinking.
Larry Ellison is said to be helping finance the deal.
Analysts said Ellison was drawn to the deal because of his past collaboration with Paramount Pictures and the lure of combining their intellectual properties, as well as the prestige of owning a historic studio. In addition to cinematic landmarks such as “The Godfather” and “Ferris Bueller’s Day Off,” Paramount’s rich history includes popular franchises including “Transformers,” “Star Trek,” “South Park” and “Paw Patrol.”
“Paramount is one of the major historic Hollywood studios with a huge base of (intellectual property), so it seems to us that this is more about using the capital that Ellison has and what he has built at Skydance and leveraging that to own a major Hollywood studio,” said Brent Painter, a research associate at Raymond James, before the deal.
Read more: David Ellison’s Journey from Trust Fund Kid to Media Mogul Bidding to Buy Paramount
The deal is poised to close the books on the Redstone family’s 37-year run at the company formerly known as Viacom, starting with Sumner Redstone Hostile takeover in 1987.
Seven years later, Redstone was able to wrest control of Paramount, merging Viacom with the ultimately doomed video rental chain Blockbuster to secure enough money for a $10 billion deal. Redstone had long viewed Paramount as the crown jewel, a belief that had taken root a half-century earlier when he negotiated theatrical release terms for Paramount’s high-profile films to be shown in his regional theater chain.
Under Redstone’s leadership, Paramount won Oscars in the 1990s for “Forrest Gump” and “Saving Private Ryan.”
He pioneered the idea of treating films as an investment portfolio and hedging bets on some productions by bringing in financial partners – a strategy now widely used throughout the industry.
In 2000, Redstone expanded his media empire again with the acquisition of CBS, a move that made Viacom one of the most powerful media companies at the time, rivaling The Walt Disney Company and Time Warner. Just six years later, Redstone split the company into separate sister companies, convinced that Viacom was more valuable to advertisers because of its younger audience. Redstone also wanted to make money from two companies.
After years of mismanagement at Viacom, which coincided with the elder Redstone’s declining health and turmoil on the board, his daughter stepped in to remove Viacom’s senior management and board members. Three years later, in the wake of Executive Misconduct Scandal At CBS, Shari Redstone achieved her goal by: CBS and Viacom Reunite In a deal worth about $12 billion.
The combined company, then called ViacomCBS and valued at more than $25 billion, was supposed to become a television giant that controlled a large share of television advertising revenue through the dominance of CBS and more than two dozen cable channels.
But changes in the television landscape have had their impact.
Read more: The strikes are over, but Hollywood’s lost year marks a turning point for the industry.
As consumers shift away from cable and TV ad revenues decline, ViacomCBS’s biggest asset has become a serious liability.
The company was late to the streaming wars and then spent heavily on its Paramount+ streaming service to try to catch up with Netflix and even Disney. (In early 2022, the company was Renamed to Paramount Global. (A nod to her filmmaking past and a tie-in with the streaming platform of the same name.)
The company’s eroding linear TV business, declining TV advertising revenue and its struggle to make streaming profitable are among the major challenges Ellison will face as he takes over Paramount. Traditional TV is in decline, but it still makes money for Paramount.
Indeed, streaming is a very different economic proposition than television, one that offers lower profits. At the same time, the company also faces larger industry questions about when — if ever — box office revenues will return to pre-pandemic levels.
“This is a company that is floating on hope, and hope is not a great business strategy,” said Stephen Galloway, dean of Chapman University’s Dodge College of Cinema and Media Arts.
This story originally appeared in Los Angeles Times.
