Paramount To Receive Cash Infusion To Pay Off Debt in Skydance’s $5B All-Stock Deal

By Moon Harper

Apr 08, 2024 06:38 AM EDT

The Wall Street Journal reported on Friday that Paramount Global and Skydance Media are considering an all-stock five billion dollars deal.

Skydance's Cash Infusion Offering

As per the report, National Amusements, the entity controlling Paramount, would receive more than two billion dollars in cash as the initial transaction step under the discussed terms.

According to individuals familiar with the matter cited by the Journal, Skydance might separately offer a significant cash infusion to Paramount, the owner of Paramount Pictures film studio, to strengthen its financial position and assist in debt reduction. Outside business hours, Paramount and Skydance did not answer Reuters' request for comment on the WSJ report.

According to a Reuters report on Wednesday, members of Paramount's board have decided to engage in exclusive merger discussions with Skydance Media. They prefer the independent studio over a twenty-six billion dollars bid from private equity firm Apollo Global Management.

By merging the two companies, the resulting entity would gain significantly more flexibility regarding franchise management. Additionally, it mentioned that Redstone would receive cash, while investors holding non-voting shares would receive stock in the combined company.

The negotiations for the deal are reportedly more advanced than the offer from Apollo. If successful, the deal would end Shari Redstone's control over the media empire established by her late father, Sumner Redstone.

Skydance, headed by David Ellison, son of Oracle co-founder Larry Ellison, aims to acquire National Amusements, which directly or indirectly holds approximately 77% of Paramount's voting class stock.

The latest developments emerge as Skydance has commenced exclusive negotiations with Paramount, with a 30-day timeframe, as part of its endeavor to finalize a deal. This follows Skydance's initial offer, made in January for an undisclosed amount, indicating their continued pursuit of an agreement.

Skydance's Long-Standing Interest With Paramount

With an exceeding four billion dollars valuation, Skydance showed interest in Paramount's portfolio of assets in December, which encompasses Paramount Pictures, Paramount+, CBS, and cable networks such as MTV, Comedy Central, and Nickelodeon.

Warner Bros. Discovery CEO David Zaslav engaged in discussions with Paramount Global CEO Bob Bakish in December regarding a potential merger, which have now ceased. Other interested parties include Allen Media Group founder Byron Allen, who submitted a thirty billion dollars bid, including debt, for the company, Apollo Global Management, which initially offered eleven billion dollars to acquire Paramount's film and TV studio, followed by a twenty-six billion dollars bid for the entirety of Paramount Global. Paramount Global's special committee approval would be required for any deal to proceed.

Paramount, valued at eight billion, one hundred seventy million dollars in market capitalization, reported long-term debt of fourteen billion, six hundred million dollars by the end of 2023. However, during Friday's trading session, its shares experienced a 3% decline. Stocks have decreased by 17% year to date and have fallen by 43% over the past year.