How negotiations to sell Paramount turned Titanic into a flop

After more than six months of difficult negotiations, David Ellison felt he was on the verge of making the biggest deal of his life: the acquisition of Paramount, a century-old Hollywood studio.

Ellison received a message in Los Angeles on Tuesday morning from an adviser to Shari Redstone, the heiress who controls the media conglomerate that includes Classics. Saint, chinatown And Titanicthat all the financial details of the deal have been finalized. At a meeting at 2.30 pm (New York time) on Tuesday, Paramount’s special committee plans to give the green light to Ellison’s company Skydance Media’s proposal.

And then there was a twist in the tale. Minutes before the independent advisers evaluating the Skydance bid recommended it, Redstone’s lawyers, Ropes & Gray, sent a brief email to the special board committee saying the deal was off. According to a person familiar with the matter, the message said, “While it is true that we have agreed on all material economic terms, certain other conditions remain pending, and we are essentially backing out.”

“Shary killed a deal that had been fully negotiated, all the key economics had been fully discussed, two minutes before the special committee meeting,” the person added. “That was it.”

It was an abrupt, bitter end to a story whose two main characters had forged an unlikely bond. Both are the children of hard-working billionaire fathers: Redstone, 70, is the daughter of Sumner Redstone, who built the media and entertainment empire that is at the core of Paramount — a group that also includes the CBS television network, MTV, Comedy Central and Nickelodeon. Ellison’s father, Larry, is the billionaire co-founder of software conglomerate Oracle.

David Ellison also has deep ties to Paramount, having produced a number of blockbuster films with the studio, including Top Gun: Maverick,

But in recent weeks, their relationship has frayed as they clashed over the details of the deal — and speculation has mounted that Redstone had doubts about leaving the family business. When it was all over, frustrated advisers said they couldn’t remember a more messy process. And observers from Wall Street to Hollywood were left wondering what Redstone’s next move would be.

Paramount presented Ellison with a rare opportunity to gain control of one of Hollywood’s crown jewels, a building rich in history with its iconic plot of land on Melrose Avenue and a hundred-year-old library of films.

The studio has struggled to adapt to the digital age, but Ellison, 41, believes he can fix the group’s growing problems. Its once-mighty, generation-defining television channels such as MTV have long been in decline, while the Paramount+ streaming service is operating at a loss.

Paramount, which is valued at less than $8 billion on the stock market, has more than $14 billion in debt and was recently downgraded to junk. Investors have lost confidence that the company can compete on its own, making it the subject of takeover speculation for several years. Shares have fallen 30 percent this year, including a nearly 15 percent drop since talks were canceled.

The deal was never going to be easy. Ellison’s plan had two steps: First, his company would buy National Amusements (NAI), the Redstone-controlled conglomerate that owned 77 percent of Paramount’s voting shares. Then Paramount would acquire Skydance in a stock deal.

The first cracks emerged in May when Ellison’s consortium, which included private equity groups RedBird and KKR as well as his family’s estate, adjusted its offer when it became clear that Paramount’s common stockholders were planning to retaliate. Several holders of Paramount’s nonvoting stock publicly threatened to sue if the deal went through, saying all the value would go to Redstone, who owns a majority of the voting shares.

The Ellison team therefore decided to pay NAI – and by extension, Redstone as well – less than the originally proposed amount in order to make the deal more attractive to Paramount’s B shareholders.

Redstone stopped speaking to Ellison after Skydance decided in May to lower its offer to NAI from $2.5 billion to $2.3 billion, people familiar with the matter said. Others involved said the decision to stop communicating was made out of respect for the negotiation process with the special committee. NAI ultimately agreed to a lower offer of $2.3 billion, these people said.

Still, Redstone had begun to lose confidence in Ellison after the adjusted offer, people close to him said. Despite Redstone’s changing perception of Ellison, the Skydance founder was highly respected by NAI and Paramount advisers for his integrity throughout the process, those same people said.

Only after Ellison was told the deal was off did Redstone tell her she was upset about the cut in the cash offer for her stake, according to a person close to her. “She was upset she didn’t get more,” the person said.

Others close to Redstone dispute this, saying the deal failed because Ellison’s group opposed calls to allow nonvoting shareholders to record their “consent” — or lack thereof — to the transaction through some kind of tally. “Obviously that would have protected against shareholder litigation,” said another person familiar with Redstone’s thinking.

People close to Skydance and Paramount said Redstone decided at the last minute to use a “concurrence” vote to end the deal; the issue had been clear early in negotiations.

There were other signs of friction as Redstone pursued a sale. In April, Redstone fired Bob Bakish, his longtime confidante, who had made no secret of his opposition to the Skydance deal and continued talks with other potential suitors. He replaced Bakish with three Paramount executives who formed an “Office of the CEO.” Four board members also left this spring.

Throughout the process, other potential bidders have come and gone. Paramount shares fell in December when it was revealed that Bakish had met with David Zaslav, his counterpart at Warner Bros. Discovery. Private equity group Apollo has approached Paramount twice, most recently adding Sony as a partner. And this week Seagram heir Edgar Bronfman Jr. approached in conjunction with Bain Capital.

Several people directly and indirectly involved in the process said there was something more than money that convinced Redstone to back away from a deal with Ellison he had initiated months earlier.

Several said Redstone could not contemplate walking away from the company founded by her grandfather and built into a global force by her father, with whom she had a strained relationship.

Redstone appeared pleased with the turnaround plans drawn up by three members of the CEO’s office — a group that many expected would be merely a placeholder until the Skydance deal was completed. But last week he unveiled plans to cut costs and reorganize the group, and she has given them her approval.

“If Skydance is only going to reduce costs from the business and streamline the streaming business, we can do that ourselves without the risk of litigation and the expense of 12 to 18 months of [to get to] “This is about to take off,” said one person familiar with the strategy.

However, some investors are aghast at the idea. “It might be OK as a caretaker model,” said John Rogers, president and co-CEO of Ariel Investments. “But I haven’t experienced anything where you have a long-term arrangement with three leaders. It’s not typical.”

Several people, including former and current board members, said another factor working against Skydance was the role of Paramount board member Charles Phillips, who attempted to thwart the deal throughout the process.

Phillips, who worked at Oracle until 2010, was opposed to the deal and frequently spoke out against it, former and current Paramount board members said, including by creating multiple obstacles to the deal with Skydance and speaking negatively to Redstone about the Ellison family.

Several people involved in the process said Phillips should have recused himself because they were personally opposed to the Ellison family because of their history. Phillips did not immediately respond to a request for comment.

Another Oracle veteran was stepping in from the other side: Larry Ellison himself, who became more involved as the talks wound down. Some in the Redstone camp cited Larry Ellison’s involvement as a reason for the escalation of tensions last week. “The more Larry gets involved, the more the relationship deteriorates,” said one person familiar with the situation. “There was an affection for David, but Larry is more pointy-elbowed.,

Another person involved in the deal negotiations dismissed such concerns. “Larry was obviously involved,” he said. “Larry was writing a big check.”

Whatever the tensions, David Ellison believed he was going to sign a deal to buy Paramount this week. “Everything is resolved,” said one person involved.

Like a classic Hollywood cliffhanger, the collapse leaves Redstone in a bind with no clear way out. Paramount is small, struggling and entangled under a mountain of debt, and its stock price continues to fall. His family’s wealth is weakened by financial pressures related to his father’s death. And NAI also has its own debt burden. Yet even after months of negotiations, people close to Ellison’s bid say they are unsure what caused Redstone to withdraw the bid.

“At the end, [maybe] “When she got to the finish line she decided she couldn’t sell her inheritance,” one said.


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