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David Ellison’s Skydance Media plans to acquire 100% of Paramount Global, sources say

Shari Redstone, President of National Amusements and Vice President of CBS and Viacom, speaks during the WSJTECH live conference in Laguna Beach, California, United States, October 21, 2019.

Mike Blake | Reuters

David Ellison’s Skydance Media and its backers are exploring a deal to take the entire Paramount Worldwidepeople familiar with the matter told CNBC.

Skydance, the film and television studio run by Ellison, has exchanged preliminary information with Paramount, said the sources, who asked to remain anonymous because the negotiations are private. Due diligence has not yet begun, the people said.

Skydance worked with private equity firms RedBird Capital Partners and KKR & Co. on a deal to buy National Amusements, the holding company owned by Shari Redstone. It controls 77% of Paramount’s voting shares.

But that deal is contingent on Skydance merging with Paramount, and the likely structure of a merger would be a complete privatization of the largest media company, the sources said.

Redstone plans to sell as the media landscape shifts away from traditional television and toward streaming. Although Paramount Global has run a profitable business for decades, it is smaller than Netflix, Google’s YouTube, Apple, Amazon and other larger streamers that have bigger balance sheets to afford sports and entertainment content.

No acquisition is assured and negotiations could fail. Shares of Paramount Global rose nearly 7% in premarket trading Thursday.

It is unclear whether Redstone would demand a different premium for the sale of National Amusements than the remaining Paramount Global shareholders would get.

Skydance would need additional capital to acquire Paramount, which has a market cap of $8.2 billion and debt of about $15 billion. Some of that funding could come from Skydance’s private equity partners and Larry Ellison, the billionaire co-founder of Oracle and the father of David Ellison. Skydance has not yet sought outside financing because it has not yet decided whether it wants to move forward with a deal, the sources said.

Skydance is not interested in a deal in which it acquires only National Amusements, but not all of Paramount, the sources said. Although such a deal would give Skydance control of Paramount, it would not solve Paramount’s problems as a publicly traded company, which include running the growing but money-losing streaming service Paramount+ and operating declining linear cable assets such as MTV, VH1, Comedy. Central and Nickelodeon.

Spokespeople for RedBird, Skydance, Paramount Global and National Amusements declined to comment.

Discovery of Warner Bros. has also held preliminary discussions about acquiring Paramount Global, according to people familiar with the matter. If Redstone sells to Skydance, a motivating factor would be its fear that Warner Bros. Discovery prefers to merge with Comcast‘s NBCUniversal, one of the people said.

Puck first reported Skydance’s interest in acquiring National Amusements. The Wall Street Journal reported Last week, Skydance was interested in a two-part deal that would include the merger of Skydance and National Amusements. Bloomberg first reported initial exchange of company information.

Disclosure: Comcast NBCUniversal is the parent company of CNBC.

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