For seven months, media mogul Shari Redstone campaigned to get Paramount Global's leaders to accept her plan to hand over the storied media company to technology scion David Ellison.
Paramount's then-CEO Bob Bakish and several board members resisted. Investors howled that Ellison's deal would give Redstone and his family a rich premium for their controlling shares of Paramount, at the expense of regular shareholders. Undeterred, Redstone fired Bakish, his former lieutenant, and four board members were shown the door.
By late Saturday, the Redstone family and Ellison's Skydance Media had reached a major settlement. Ellison, son of tech billionaire Larry Ellison, was poised to win his hard-won prize. Weary Paramount workers checked their email, expecting to receive an important announcement at any moment. Independent board directors scheduled a meeting Tuesday at 11:30 a.m. to formally consider the deal.
But just as the meeting began, Redstone called with surprising news.
The deal with Skydance was dead.
Redstone's change of heart, after months of drama and tensions became public, was the culmination of several forces that had been at work behind the scenes, according to seven people close to the situation who were not authorized to comment on internal discussions.
Redstone's adult children, who are in line to inherit the family fortune, had initially advocated for the deal with Skydance, according to two of the sources. But earlier this month, the matriarch was growing increasingly uncomfortable.
On Monday, three sources said, Redstone and his children agreed to keep his heirloom, abruptly ending one of the industry's most calamitous auctions.
“It's Shari's company,” a source said. “She had kicked and clawed to control herself, and she just wasn't ready to let go.”
What prompted the Redstone reversal?
The 70-year-old tycoon was unhappy with changes to the terms of the deal that would have meant less money flowing to the family holding company, National Amusements Inc., two sources said.
Initially, the family expected about $2 billion for NAI, which owns 77% of Paramount's voting shares. But the deal was restructured (with Redstone's participation) to provide more money to common shareholders, which would have left the family with about $1.7 billion after NAI's debt was paid, insiders said.
On the other hand, Redstone wanted to be compensated for its shareholders' costly lawsuits and give other shareholders a say. But that was a sticking point for Skydance.
And other suitors have emerged. In recent weeks, Redstone received proposals to sell only National Amusements and its controlling shares of Paramount, which would represent a simpler transaction.
Former Seagram and Warner Music top executive Edgar Bronfman Jr. and Hollywood producer Steven Paul (“Ghost in the Shell,” “Baby Geniuses”) have separately expressed their desire to purchase National Amusements. Both potential bidders said they would pay more than the amount National Amusements would have received under Skydance's bid.
The Redstones wanted to honor their late patriarch by not selling the family jewels at a low price. The Redstone family anticipates that a better offer for NAI will materialize soon, sources said.
The sale of Paramount would have marked the end of an era for the Redstone family, which has long prized its position in Hollywood. And it was Shari Redstone who worked for years on the sidelines of her father Sumner Redstone's growing empire. The late tycoon and his top executives at his company, then known as Viacom, disparaged his talent and ambition.
But Shari Redstone stuck it out, and in 2016, as her father's health worsened, she led a sweeping corporate cleanup.
Three years later, Redstone achieved his lifelong goal by bringing together Viacom and broadcaster CBS. The combined company was renamed Paramount Global in 2022, but its shares have since plummeted. Shareholders, including legendary investor Warren Buffett, walked out.
Bakish's dismissal was key to the unfolding drama, sources said.
Redstone and Bakish had been fighting behind the scenes since November, people familiar with the matter said. He had become increasingly impatient with the slow performance of Paramount's stock and the downgrade of its credit to “junk” status. And she was furious about Paramount's May 2023 decision to cut its dividend to shareholders, according to three sources.
Bob Bakish, former CEO of Paramount.
(Maury Phillips/Getty Images for Viacom)
The dividend cut devastated the Redstones' company, NAI, which then turned to Chicago banker Byron Trott and his BDT Capital Partners for a $125 million cash injection last year to pay off creditors demanding money.
Bakish was fired on April 29. In an unusual deal, the board named three division heads: George Cheeks, head of CBS; Chris McCarthy, head of cable entertainment; and Brian Robbins, head of the Paramount and Nickelodeon film studio, as the “Office of the CEO.” The trio immediately went to work crafting a business plan for Paramount that would satisfy Redstone and Wall Street.
After Paramount's June 4 shareholder meeting, the three executives gave a private presentation that captivated Redstone and other board members, people familiar with the matter said.
The company finally seemed to have a way forward on its own.
The three executives also developed a kinship with Redstone, who had recently been reinvigorated by the challenge of returning Paramount to greatness.
The CEOs' plan focuses on $500 million in cost cuts, including an undisclosed number of layoffs, and the sale of assets, which analysts say could include cable channel BET and unaffiliated television stations. to CBS. The group also said they would explore a joint venture for the company's Paramount+ streaming service.
Talks last fall with Comcast about a streaming joint venture stalled because, at the time, Redstone was pursuing the deal with Skydance.
“Their balance sheet is, in a word, unhealthy and they need a cash injection to improve it, which means they need to sell the assets,” said Laurent Yoon, media analyst at Bernstein & Co.. “They have no choice. “
Another obstacle to a deal with Skydance was the Redstone family's concerns that a regulatory review process could last 18 months, causing further instability for the struggling media company. The deal was “already taking forever,” a source said.
There were other factors too. Paramount's top independent director, Charles Phillips Jr., had long opposed the $8 billion two-phase transaction with Skydance. The Santa Monica production company, its investors RedBird Capital Partners and private equity firm KKR, along with Larry Ellison, were investing billions of dollars in the deal.
Phillips, former president of Larry Ellison's Oracle Corp., had left that software giant in 2010 on difficult terms. There has been speculation that Redstone is now considering Phillips for a larger role.
“We continue to believe that Redstone/National Amusements is likely to appoint current Paramount board member and former Viacom board member Charles Phillips as CEO,” industry analyst Richard Greenfield wrote in a note.
A person close to Redstone downplayed the speculation, saying the mogul has deep respect for Phillips, as well as Cheeks, McCarthy and Robbins.
David Ellison, who has built a reputation in Hollywood as a successful film producer, had planned to install his own leadership group at Paramount, which would have left Robbins, the head of the film studio, particularly vulnerable, sources said.
Executives at McCarthy's cable programming division also felt threatened, acknowledging that their future was uncertain because Skydance might have decided to sell cable channels to pay off its debt. “They now live to fight another day,” another source said Wednesday.
The company could choose to ride out a few years of difficulties as it shrinks to a content-only company, analysts said.
Paramount shares closed Wednesday down 8 cents to $11.12.
The failed sale does not solve National Amusements' financial problems.
The late magnate Sumner Redstone.
(Lawrence K. Ho/Los Angeles Times)
“We believe National Amusements is interested in selling Paramount eventually,” said analyst Greenfield. “We suspect the next 12 to 18 months will be a 'pause' at Paramount [merger and acquisition] process, not the end.”
Times staff writer Samantha Masunaga contributed to this report.
