Billionaire entertainment executive Edgar Bronfman Jr. has backed out of his long-shot bid to gain control of Paramount Global, clearing the way for David Ellison's Skydance Media to take the prize.
On Monday night, Paramount's lead independent director announced that the company's auction had ended and that Skydance's acquisition would go ahead. If Skydance wins approval from federal regulators, Ellison and his team could take over in about a year.
“Having thoroughly explored viable opportunities for Paramount for nearly eight months, our Special Committee continues to believe that the transaction we have agreed to with Skydance offers immediate value and the potential for continued value creation in a rapidly evolving industry landscape,” Charles E. Phillips Jr., chairman of Paramount’s special committee, said in a statement.
The move comes less than a week after Phillips and other independent directors extended the deadline for the “buyer call” period to review Bronfman's $6 billion offer to acquire the Redstone family's investment firm, National Amusements Inc., and also provide a $1.5 billion cash injection to help the struggling media company.
“Tonight, our bidding group informed the special committee that we will be withdrawing from the acquisition process,” Bronfman said in a statement. “It was a privilege to have the opportunity to participate. We continue to believe that Paramount Global is an extraordinary company, with an unmatched collection of renowned brands, assets and people.”
It was not immediately clear why Bronfman withdrew ahead of a Sept. 5 deadline for independent members of Paramount’s board to decide which bidder would take over the embattled media company that owns CBS, Comedy Central, Nickelodeon, MTV and the storied Melrose Avenue film studio. The special committee was set to review Bronfman’s proposal this week.
But there were signs that Bronfman's offer would fall short of Skydance Media's $8.4 billion proposal, which controlling shareholder Shari Redstone and Paramount's board had approved in July.
Ellison's Skydance offer had several advantages.
Not only were the financial terms higher, but Ellison had a major advantage over other interested bidders. The tech scion initially contacted Redstone last summer to outline his interest in buying out his family’s stake and investing in the company his father had run for decades when it was known as Viacom. Paramount board members began discussing Ellison’s deal in December.
By pulling out before the special committee formally made its decision, Bronfman may have wanted to spare himself and his fellow investors the embarrassment of being turned down at the high-profile auction.
“On behalf of the Special Committee, we thank Mr. Bronfman and his group of investors for their interest and efforts,” Phillips said.
Paramount executives declined to comment Monday night. But last week, the special committee said Bronfman’s offer would be the only offer other than Skydance’s that the board was willing to consider. The bidding period closed for all other bidders on Aug. 21.
Bronfman's decision also removes some friction in the process for Paramount.
Just last week, after members of the special committee extended the deadline for Bronfman to purchase her products, Skydance expressed its displeasure.
In a letter to the Paramount special committee, the firm's lawyers accused the committee of violating the terms of Skydance's agreement to buy National Amusements and Paramount, according to people familiar with the matter.
“While there may have been differences, we believe that everyone involved in the sale process is united in the belief that Paramount’s best days are ahead,” Bronfman said in his statement. “We congratulate the Skydance team and thank the special committee and the Redstone family for their commitment throughout the sale process.”
The former Seagram and Warner Music executive had sought to take advantage of a provision in the Skydance deal that gave Paramount's board 45 days to solicit bids that were “superior” to Skydance's.
After weeks of trying to assemble a group of investors, Bronfman delivered his pitch on Aug. 19 to Phillips, Paramount's top independent director.
Bronfman's main argument was that his group's takeover would be simpler than the deal advocated by Ellison and therefore better for Paramount shareholders. It mirrored many of the provisions of Skydance's proposal.
Bronfman said he would match Skydance's offer to buy National Amusements for $2.4 billion. Once the company's debts of about $650 million are paid, the Redstone family would be left with $1.75 billion.
Both offers would inject $1.5 billion into Paramount's battered balance sheet, allowing it to pay down its debts when the deal closes. Federal regulators must intervene, a process expected to take about a year.
But Skydance had an advantage in one important ingredient that helped it win the support of Paramount's board. Last spring, Skydance said it would spend $4.5 billion to buy shares from Paramount investors, including nonvoting Class B stock at $15 a share.
Bronfman was quick to identify funds (a proposed $1.7 billion reserve) to offer Class B investors $16 per share.
His offer would also have covered the $400 million that would have been owed to Skydance if Paramount had favored Bronfman's bid.
Bronfman's proposal was aimed at eliminating a controversial step in the deal with Ellison, in which Ellison merged his Santa Monica-based company Skydance with Paramount.
Some Paramount shareholders have complained about Skydance’s $4.75 billion valuation, arguing that the entertainment company is not worth anywhere near that amount. Skydance is a co-owner of some of Paramount’s biggest blockbusters, including “Mission: Impossible,” “Top Gun: Maverick” and “Star Trek.” Ellison’s company has also been building an animation studio under the direction of John Lasseter, a former Pixar creative executive.
Several sources speculated that the Paramount board's willingness to consider Bronfman's proposal stemmed from Redstone's desire to protect his family from costly shareholder lawsuits.
The sale process has already sparked litigation, and efforts by Paramount executives to seek explicit arguments may have been aimed at proving that Skydance was the only viable bidder.
Skydance Media is backed by Ellison's father, Larry Ellison, and Redbird Capital Partners.
