Paramount Global (NASDAQ:PARA) shares continued to decline on Wednesday after Shari Redstone, who controls Paramount through National Amusements, ended merger discussions with Skydance Media, as confirmed by NAI.
The stock fell over 2% in pre-market trading, following an 8% drop on Tuesday upon the news.
The Wall Street Journal first reported that Redstone might now consider selling only NAI, instead of merging Paramount with another company. Hollywood producer Steven Paul and media executive Edgar Bronfman Jr. have shown interest.
This move comes as a surprise since a special committee of Paramount’s board had recently endorsed the Skydance deal after extensive negotiations. The committee was scheduled to vote on the merger with Skydance on Tuesday afternoon.
NAI’s statement cited an inability to “reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI.”
“NAI appreciates Skydance’s efforts over the past months and looks forward to continued successful collaborations between Paramount and Skydance,” the statement read, adding that they will explore further opportunities to create value for all Paramount shareholders. Paramount declined to comment.
Other potential buyers for Paramount include Sony Pictures Entertainment, Apollo Global Management (NYSE:APO), Warner Bros. Discovery (NASDAQ:WBD), and media mogul Byron Allen.
Despite various offers, Redstone had consistently preferred the Skydance deal. Skydance, known for its collaborations with Paramount on franchises like “Mission Impossible,” “Top Gun: Maverick,” and “Transformers,” revised its offer multiple times due to nonvoting shareholders’ concerns.
The latest Skydance offer, valued at $8 billion, included Shari Redstone selling National Amusements’ controlling stake in Paramount for around $2 billion. National Amusements owns about 10% of Paramount’s equity and holds 77% of voting shares.
Supported by private equity firms RedBird Capital and KKR, Skydance planned to merge its studio business with Paramount at a valuation just under $5 billion. Skydance and its affiliates also proposed a $1.5 billion cash infusion to reduce Paramount’s debt.
Skydance’s proposal involved purchasing roughly half of Paramount’s nonvoting shares for $4.5 billion, or about $15 per share. Nonvoting shareholders would have had the option to cash out half of their stock at this premium, with the remaining shares converting into shares of the newly merged company.
According to Bloomberg, investors in Paramount’s voting stock, outside of the Redstone family, would have received $23 per share.
Amid the merger uncertainties, Paramount announced CEO Bob Bakish’s departure in late April. He was reportedly at odds with Redstone over the Skydance deal. An “Office of the CEO” consortium of three division heads has since taken over.
At Paramount’s recent annual shareholder meeting, the executives outlined a $500 million cost-cutting plan, including layoffs and exploring asset sales and streaming partnerships.
“We agree that Paramount is not where we want it to be,” said co-CEO Chris McCarthy. “Given the strength of our assets and our people, we know there is significant value to unlock.”
Management is poised to implement cost reductions, with $500 million in savings as a start, and more announcements expected in August, pending a potential sale.
“We’re confident the business can be run more efficiently by adapting to today’s environment,” said co-CEO George Cheeks, citing redundancies in areas like real estate, technology, and marketing. “These reductions will position the company for sustainable long-term growth.”
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