Skydance sweetens Paramount bid as Bob Bakish departs

Skydance has sweetened its offer to take control of Paramount by injecting extra cash to win support for a complex merger that has frustrated investors and led to the departure of the Hollywood group’s chief executive.

The Skydance offer includes about $2bn to take control of National Amusements, the Shari Redstone-controlled group that holds nearly 80 per cent of Paramount’s voting shares.

Skydance, the production company led by David Ellison, will also pump $3bn into Paramount, including a control premium to Paramount’s common shareholders — a group that has pushed back strongly against the Skydance bid.

The offer came as Paramount chief executive Bob Bakish resigned on Monday, raising new questions about the future of the Hollywood group behind The Godfather.

Bakish, who had worked at the company and its predecessor Viacom for a quarter of a century, had previously been an ally of Redstone, who promoted him to chief executive of Viacom in 2016. But their relationship had deteriorated in recent months as the company weighed its strategic options, including the Skydance bid, according to several people familiar with the matter.

Redstone said on Monday: “The board and I thank Bob for his many contributions over his long career . . . we wish him all the best.”

Redstone and Paramount’s board, which Redstone chairs, have been trying to agree a deal to merge the company with Skydance, which is backed by Ellison’s billionaire father, Larry Ellison, as well as RedBird Capital and KKR. 

Under the latest terms of the proposal, Skydance would buy Redstone’s National Amusements for close to $2bn, not as much as previously discussed between the two sides, said people briefed on the matter.

Those people added that Paramount would then merge with Skydance, valuing Ellison’s company at about $5bn in an all-stock deal. The combination would value the common shares of Paramount at about 30 per cent above its current trading share price.

The Ellison-led consortium would invest a further $3bn in the combined company, the people said.

Shareholders would have the option to either sell their shares in Paramount or keep the stock of the combined company, or a combination of the two, as the buyback would be limited to a maximum amount of $2bn. Paramount’s Class B common shares have a current market capitalisation of about $7bn.

Paramount has a dual-class shareholding structure. Redstone’s National Amusements controls nearly 80 per cent of voting rights but holds only 10 per cent of equity ownership. Many Paramount shareholders baulked at a previously proposed merger structure, which they argued would benefit Redstone at the cost of common shareholders.

Redstone would remain an investor in the combined Paramount-Skydance, a move that aims to show her conviction that the Ellison-led group would turn round the fortunes of Paramount, which has struggled to compete with larger rivals such as Netflix in an expensive “streaming war”.

“There will be more alignment between [Redstone’s] interest and shareholders than before,” said one person familiar with the arrangement.

The Paramount board has set up a special committee to evaluate the plan.  

Paramount on Monday said a team of three executives — George Cheeks, Chris McCarthy and Brian Robbins — would replace Bakish, establishing an “office of the CEO”. Bakish was paid a total of $31.5mn in 2023, according to a regulatory filing.

Private equity group Apollo, in partnership with rival studio Sony, was also preparing to bid on Paramount as soon as this week, according to people familiar with the situation. Paramount recently rejected Apollo’s $26bn all-cash offer, and four members of the Paramount board have since withdrawn their names for re-election in June.

Paramount on Monday reported a net loss of $554mn on $7.7bn in revenue in the first quarter. The company did not take questions on its earnings call, which lasted less than 10 minutes.

“There’s no dressing this up — looks like a car crash with clear divisions among key stakeholders,” said analyst Paolo Pescatore at PP Insights. “The latest chapter in this ongoing saga looks to be taking another turn for the worse.”