Paramount agrees to merge with Skydance

An exterior view of The Melrose Gate of the Paramount Pictures studio in Los Angeles on April 26, 2023. A special committee of Paramount’s board on Sunday signed off on a deal to merge with Skydance, according to two people familiar with the negotiations, setting the stage for a new era for CBS, Nickelodeon, and the film studio behind the “Top Gun” and “Mission: Impossible” franchises. (Mark Abramson/The New York Times)

By Benjamin Mullin and Lauren Hirsch

Paramount and Skydance said Sunday they had reached an agreement to merge, a deal that would usher in a new era for CBS, Nickelodeon and the film studio behind the “Top Gun” and “Mission: Impossible” franchises.

The deal is a turning point for the Redstone family, whose fortunes have been intertwined with the rise and fall of the traditional entertainment industry during the decades of its tumultuous ownership of Paramount and its predecessors. Shari Redstone, Paramount’s board chair, is cashing in much of her ownership in the company she fought to preserve and control.

The merger has a “go shop” period that will give Paramount’s board a 45-day window to see if it can find a superior deal.

But if the Skydance deal closes, it will anoint a new mogul in Hollywood. David Ellison, the tech scion behind Skydance, will become the top power broker at Paramount. The deal is in some ways the story of media writ large, with a family that made its fortune in traditional entertainment largely replaced by one enriched by technology — Ellison is the son of Oracle founder Larry Ellison. The Ellisons’ considerable resources were a major selling point for the Redstones, who were seeking to shore up Paramount for the long-term.

“Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king,” Redstone said in a statement.

The merger closes a chapter for Redstone, 70, who took over from her father, Sumner, and fought to keep the family media empire intact.

Ellison, who will become chair and CEO of Paramount, thanked Redstone in a statement, saying he was “incredibly grateful” that she had “agreed to entrust us with the opportunity to lead Paramount.”

In recent years, Paramount has become the poster child of a traditional media industry that has been limping along in the shadows of streaming giant Netflix and tech companies such as Amazon, which have plenty of cash to spend on their media bets. Paramount has tried to replace its fading cable TV enterprise with streaming businesses such as Paramount+, but those efforts are still nowhere near as profitable as traditional TV operations.

The full value of the merger was not immediately clear because the deal is complex. Skydance and its financial backers will acquire National Amusements, a company that holds the Redstone family’s voting stock in Paramount, for roughly $1.75 billion. Paramount is also merging with Skydance, leaving the studio and its backers in charge of a media empire that includes film, TV and news properties.

Paramount’s market capitalization — the value the stock market places on the company — is about $8.2 billion. The deal values Skydance at $4.75 billion.

The offer from Skydance will allow many holders of Paramount’s nonvoting stock to cash out at roughly $15 per share. Investors who own voting stock will be able to sell at $23 per share. This will allow investors who feel shortchanged by the Skydance deal — there are many — to get rid of the company’s stock at a premium to its current price of $11.81.

The merger agreement comes at a precarious time for Paramount. Its flagship streaming service, Paramount+, is hemorrhaging hundreds of millions of dollars in cash annually. After clashing with Redstone, its CEO, Bob Bakish, was replaced by three executives, who run an “office of the CEO” — an awkward, temporary fix. And its cable business is in long-term decline, causing its stock to slide more than 70% over the past five years.

In the past month, Paramount’s three CEOs have proposed a plan they say will help get Paramount back on track that includes cutting $500 million in costs and selling off parts of the company that aren’t central to its strategy. Losses are beginning to slow at Paramount+, and the company is exploring a potential joint venture with other firms that could reduce costs further.

Now taking control of the flagging company will be Ellison, a Hollywood producer and executive who has helped fund some of Paramount’s biggest franchises. After dropping out of the University of Southern California to try his hand at acting, Ellison began to finance films, founding Skydance in 2010. The company has produced some of its most successful movies with Paramount, including “Top Gun: Maverick” and “Mission: Impossible — Dead Reckoning Part One.”

Ellison, 41, is planning to bring his own cast into Paramount. Jeff Shell, a former CEO of NBCUniversal, will be president of the new company. He was fired from NBCUniversal last year after an anchor at CNBC lodged a sexual harassment complaint against him. Late last year, he joined RedBird Capital Partners, a Skydance backer, as its chair of sports and media.

Bakish, 60, remains an adviser to Paramount. His exit agreement, filed in May, says he will continue to work for the company through October with a monthly salary of $258,333 and benefits. His exit package also includes a two-year nondisparagement agreement.