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Paramount, The Media Empire Behind CBS And ‘Top Gun,’ Agrees To Merge With Skydance
Paramount Global—the huge media conglomerate that owns CBS, MTV, and one of Hollywood’s most historic movie studios—has decided to merge with technology scion David Ellison’s Skydance Media, ending years of worry over the company’s future.
The agreement, revealed late Sunday, comes only weeks after Ellison’s previous offer to acquire Paramount crumbled at the last minute, surprising industry insiders and raising concerns about the struggling media company’s future.
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Paramount | Investopedia Image
Paramount, The Media Empire Behind CBS And ‘Top Gun,’ Agrees To Merge With Skydance
The transaction solidifies Ellison’s status as a media mogul, eliminating Shari Redstone’s control of Paramount through her family’s National Amusements holding company after her father, the late Sumner Redstone, won a fierce bidding war to put together the media empire in the 1980s.
Skydance will first acquire National Amusements before merging with Paramount, valuing the company at $4.75 billion.
The production firm founded by Ellison will “invest $2.4 billion to acquire National Amusements for cash and $4.5 billion for the stock/cash merger consideration to be paid for publicly traded Class A shares and Class B shares, as well as $1.5 billion of primary capital to be added to Paramount’s balance sheet,” according to the statement.
In a call with investors Monday morning, Ellison and Shell set out Paramount’s strategy, seeking to become a “technological leader” in the streaming industry and unveiling cost-cutting efforts worth $2 billion.
“We love the creative engine of this company, but obviously a big chunk of the company is in the linear world — and we know that linear is challenged and declining,” Shell said to the media. “I think a lot of us in the business know we’ve got to run these businesses in a different way as they decline.”
The agreement ends a dramatic and protracted saga that began in December. The two firms entered exclusive talks in April, leading to the departure of longtime Paramount CEO Bob Bakish. Meanwhile, the firm has been led by a trio of executives: Brian Robbins, CEO of Paramount Pictures; Chris McCarthy, CEO of Showtime and MTV Entertainment Studios; and George Cheeks, CEO of CBS.
While legacy media firms have struggled in recent years, Paramount, with its wide portfolio of cable networks like MTV and Comedy Central, has been significantly exposed to the seismic consumer shift away from the old television model and toward streaming services. As services like Netflix grew popular, millions of individuals ditched cable packages to favor cheaper on-demand streaming TV and movies. Paramount, which relied heavily on the television industry, was caught off guard.
To offset dwindling cable income, Paramount invested billions of dollars developing its streaming service, Paramount+. However, it was late to the game, and like the competitor streaming platforms established by other legacy media corporations, the service has struggled to achieve enough customer momentum to offset its losses in the linear television industry.
The legendary company’s valuation has also plummeted due to the turmoil, with Paramount shares down more than 75% in the previous five years. At a company town hall last month, Robbins acknowledged that the conglomerate’s future had been a concern.
“We’d want to take a moment to acknowledge the problems posed by all of the M&A rumors surrounding our company. “We understand how difficult and disruptive this period has been,” Robbins added. “And while we cannot say that the noise will disappear, we are here today to lay out a go-forward plan that can set us up for success no matter what path the company chooses.”
While Redstone has been contacted recently about selling off sections of Paramount’s enormous media portfolio, including Showtime and the cable network BET, multiple high-priced bids to split the business were ultimately rejected.
Paramount | Varitey Image
Paramount, The Media Empire Behind CBS And ‘Top Gun,’ Agrees To Merge With Skydance
In recent months, as takeover bids for Paramount resumed, Sony Pictures and private equity company Apollo Global Management proposed a $26 billion deal that would have made Sony the majority shareholder and Apollo a minority shareholder. However, the deal would have resulted in the dissolution of Paramount, a possibility that Redstone opposed due to her affinity to the company her father had spent decades developing.
The sale to Skydance Media, launched in 2010 by David Ellison, son of Oracle cofounder Larry Ellison, provided Redstone with an offer she could not refuse: billions of dollars in cash and the security of selling the family business to the heir of another titan who has vowed to invest in Paramount’s future. Skydance and Paramount also have a long history, collaborating in recent years to produce some of the box office’s biggest blockbusters, including “Top Gun: Maverick” and “Mission: Impossible” films.
“Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king,” Redstone said in an interview. “Our hope is that the Skydance transaction will enable Paramount’s continued success in this rapidly changing environment.”
SOURCE | CNN
