Paramount agrees to merge with Skydance, ending Redstone era

Paramount Global agreed to merge with Skydance, capping months-long negotiations in a deal that would see the Redstone family step away from control of the storied film studio and media company.

Paramount's special committee approved the merger on Sunday, days after Shari Redstone's National Amusements, Paramount's majority shareholder, re-reached a preliminary agreement with Skydance, the production company best known for “Top Gun: Maverick.” A similar deal had been halted weeks earlier.

In the latest version of the deal, the buying consortium, which includes private equity firms RedBird Capital Partners and KKR, will invest more than $8 billion in Paramount and acquire National Amusements. The deal gives National Amusements an enterprise value of $2.4 billion, including $1.75 billion in equity.

Paramount Class A shareholders will receive $23 each in cash or stock, while Class B shareholders will receive $15 per share, equating to $4.5 billion in cash consideration available to public shareholders. As part of the deal, Skydance will also inject $1.5 billion of capital into Paramount’s balance sheet.

“It's a new Paramount, it's not just a tagline,” Jeff Shell, former chief executive of NBCUniversal and RedBird, said on a conference call with investors on Monday. “We think it will be a new day for these combined assets.”

Skydance founder David Ellison will lead the combined company as chief executive, while Shell will serve as chairman.

The merger is subject to regulatory approval and is expected to close in the third quarter of 2025. It also includes a 45-day “evaluation” period, during which Paramount’s special committee can solicit other offers.

A full merger with Skydance would mark a major shift for Paramount ownership, as well as for Hollywood as a whole.

The Redstone family has long controlled the film studio, known for such films as “The Godfather,” “Top Gun” and “Forrest Gump,” as well as the CBS broadcast network and cable television networks such as MTV and Nickelodeon.

Now, Ellison, 41, son of Oracle founder and billionaire Larry Ellison, will be at the helm of a major film studio and part of Hollywood's elite.

“It's been a long time since a creative executive has run one of the big Hollywood companies,” Shell said at Monday's conference. “And I think it's very important to have creativity at the core.”

Paramount’s business (and its stock) have been on a roller coaster, particularly over the past year, as the traditional media giant grappled with a weak advertising market and the continued loss of cable TV customers. Its flagship streaming platform, Paramount+, has yet to reach profitability.

Paramount shares fell about 5% on Monday.

The merger marks the end of decades of Redstone rule at the helm of the companies, which were previously split between two companies, CBS and Viacom.

“As you know, my father built Viacom and CBS by assembling a group of the best assets in media, news and entertainment,” Redstone said in a memo to employees Sunday night. “While people often debated whether content or distribution was king, my father was guided in all of his decisions by his belief that content was, indeed, king.”

On Monday, RedBird and Skydance executives highlighted synergies between Skydance and Paramount, noting in particular the success of CBS and the company's partnership with the National Football League. They discussed Paramount's vision for the future, which includes an emphasis on Paramount Pictures movies, CBS and sports and extracting as much value as possible from the declining traditional television business.

“The key thesis behind this transaction is our desire to inject Skydance as a pure-play content company to duplicate Paramount's prowess as one of the world-class storytelling companies,” Ellison said on Monday's call.

Ellison also set a goal of establishing Paramount as a “technological hybrid to meet the demands and needs of an evolving marketplace.”

Shell and others noted the decline of the traditional television business but said they believe it will remain a durable, cash-generating business.

The deal marks the final stage of a lengthy sales process for Redstone and Paramount.

Late last year, Paramount began talks with interested buyers, which included, at the time, Warner Bros. Discovery Adding to the hurdles facing the industry, Paramount is saddled with a massive debt of nearly $15 billion, making the financials of a deal complicated.

In early January, the Paramount special committee was formed and began evaluating strategic alternatives, including the sale of the company.

Skydance and Paramount have been moving closer to a deal in recent months, during which time Bob Bakish stepped down as Paramount CEO and was replaced by a trio of company leaders.

The parties first agreed to terms of a settlement in early June, but Redstone called it off a week later.

Shortly thereafter, Paramount's newly appointed “Office of the CEO” (CBS CEO George Cheeks, Paramount Media Networks CEO Chris McCarthy, and Paramount Pictures CEO Brian Robbins) set out their plan to restructure the company by reducing debt and finding a partner for a streaming joint venture.

Paramount's current management, which will run the company until the deal closes, said in a memo to employees Sunday night that until then it would be “business as usual,” saying they would continue to carry out planned layoffs and cost cuts and continue to explore opportunities, including partnerships and divestitures.

The Skydance-led consortium echoed its support for these strategies on Monday, saying it had incorporated the cost-cutting measures into its business model. Executives also said current management is exploring the sale of some assets, which Skydance would support for the right price.

It's possible there will be a field of bidders, given the varied interest in Paramount in recent weeks.

Media mogul Barry Diller recently expressed interest in Paramount, and former media executive Edgar Bronfman Jr. has reportedly done so as well. Sony Pictures and private equity firm Apollo Global Management have both expressed interest in an acquisition, CNBC previously reported.

The agreement reached between National Amusements and Skydance gives other potential bidders 45 days to submit an offer. If Paramount's special committee opts for a different offer, the Skydance-led consortium would receive a $400 million breakup fee.

Following closing of the transaction, Skydance will own outright all of Paramount's Class A shares and 69% of the outstanding Class B shares.

The merger values ​​Skydance at $4.75 billion, with shareholders expected to receive $317 million in Class B shares valued at $15 per share.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.