The future of Paramount Global (PARA) is now up in the air after Shari Redstone, who controls Paramount through her family’s holding company National Amusements (NAI), ended merger talks with Skydance Media.
“I was surprised,” J. Christopher Hamiltona former entertainment industry executive and Syracuse University professor told Yahoo Finance. “It seemed like a deal that was a long shot.”
Hamilton wasn’t the only one surprised by the decision. An independent special committee of Paramount’s board had recently recommended the economics of the Skydance deal after months of debate — and was scheduled to vote on the merger just before Redstone reversed his decision.
Investors took notice, too, and Paramount’s shares fell roughly 8% after the decision was made public.
“Immediately we heard industry executives and investors calling him crazy and a number of other unsavory things for ‘not taking money’ from Skydance,” Rich Greenfield of LightShed Partners wrote Wednesday.
So why then did Redstone leave the company – and what impact might this decision have on the company he controls?
Greenfield wrote, “Ultimately, we believe the legal risk of Skydance’s proposed transaction is much greater than the alternatives with National Amusements.” He added that the Skydance transaction was “very good” for Redstone and NAI, but “very bad” for Paramount’s public shareholders.
Skydance, which has previously collaborated with Paramount on the production of popular film franchises such as “Mission Impossible”, “Top Gun: Maverick” and “Transformers”, is reportedly Revise your proposal non-voting shareholders multiple times Concerns expressed Under the terms of initial discussions, Redstone was to be given $2 billion in cash as a first step in the transaction.
But critics say the proposal unfairly benefits Redstone while diluting the stakes of public stakeholders. That has resulted in a risk of litigation.
Hamilton agreed that the threat was a major hurdle in the transaction, particularly because the deal required Redstone to be indemnified from potential lawsuits.
“I don’t think Skydance was willing to accept that level of risk,” he said.
What’s next for Paramount?
Amid the merger drama, Paramount announced the departure of CEO Bob Bakish at the end of April, as he was ousted from the position. Alleged differences with Redstone He was criticised for his handling of the Skydance deal. He has since been replaced by an “Office of the CEO” consortium made up of the company’s three division heads.
Executives gathered for the company’s annual shareholder meeting on June 4, where they unveiled a plan to cut costs by $500 million. The plan will include layoffs, exploring potential asset sales and partnering with competitors for streaming joint ventures.
The company has previously considered selling parts of its business, which industry experts say would be normal following the closure of Skydance. Bet And show time Paramount in particular has been the subject of persistent sale rumors in recent years. decided against Selling the company piecemeal was largely due to Redstone’s preference to keep the company together.
“There was an effort to keep the organization intact to increase the value for a sale, but now I think they are looking at ways to control costs and sell assets rather than the entire organization,” Hamilton said.
Analysts say there is still a possibility that Redstone will sell all or part of its controlling stake in National Amusements to a third party.
“Ms. Redstone now appears intent on either continuing the status quo or selling her stake in NAI,” MoffettNathanson analyst Robert Fishman wrote Tuesday.
Looking ahead, Greenfield said he expects Paramount M&A activity to pause in the next 12 to 18 months: “There are many easy ways to create value like the ones described above that don’t require a sale today.”
Still, he believes “National Amusements is eager to eventually sell to Paramount.”
But Fishman warned, “Any plan for Paramount and any potential buyer will have to compete with a company whose mix of assets in many ways makes it challenging to navigate the changing winds of media,” a nod to Paramount’s linear network exposure, debt-ridden balance sheet and profitability problems that include a $286 million loss in its streaming business alone.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow him on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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