Paramount Global And Skydance Merger Will Shed $2 Billion In Cost Cutting Measures

Paramount Global parent National Amusements and Skydance Media have agreed to merge less than a month after the sides abruptly ended deal talks.

Paramount, owner of Paramount Pictures movie and television studios, the CBS television network and CBS News, announced in a news release late Sunday that it is combining with Skydance, an entertainment business founded by David Ellison, son of Oracle founder Larry Ellison. Paramount also owns the Paramount+ streaming service, Nickelodeon, BET, MTV, Comedy Central and other media brands. 

The transaction resolves months of speculation around the future of Paramount, which also reportedly attracted a $26 billion bid from a consortium including Sony Pictures and private equity firm Apollo Global Management. A range of prominent media and entertainment industry executives were also said to have expressed interest in a possible deal for Paramount.

Under the two-step deal, Skydance will first pay $2.4 billion for National Amusements, which controls 77% of the voting shares of Paramount. Shareholders with non-voting stock will receive $15 per share, or one share of non-voting stock in the new company. 

Class A shareholders other than National Amusements will receive $23 per share, or the right to get 1.5333 non-voting shares in the merged company. Paramount Global would then merge with Skydance in an all-stock transaction that values the latter at $4.75 billion.

The deal also gives other potential bidders for Paramount 45 days to submit a competing offer, an apparent effort to appease shareholders who felt Skydance's initial bid undervalued their stake in the media company. The transaction is subject to regulatory approval. 

Uniting old and new Hollywood

The deal unites Paramount — a storied movie studio dating back to 1912 that is known for film classics such as "Titanic," "The Godfather" and "Raiders of the Lost Ark," as well as franchises including "Star Trek" and "Mission Impossible" — with a relative newcomer to the entertainment industry. Since David Ellison launched Skydance in 2010, the company has produced or co-produced hit films and TV shows including "Top Gun: Maverick" and the "Reacher" streaming series. 

"This is a defining and transformative time for our industry and the storytellers, content creators and financial stakeholders who are invested in the Paramount legacy and the longevity of the entertainment economy," Ellison said in a statement. "I am incredibly grateful to Shari Redstone and her family who have agreed to entrust us with the opportunity to lead Paramount. We are committed to energizing the business and bolstering Paramount with contemporary technology, new leadership and a creative discipline that aims to enrich generations to come."

Ellison will serve as chairman and CEO of Paramount, and Jeff Shell, chairman of RedBird Sports and Media, a unit of investment firm RedBird Capital Partners, will become president. Shell is the former CEO of NBCUniversal.

Redstone's final act

For Shari Redstone, the controlling shareholder in National Amusements, the deal brings to a close her family's long stewardship of Paramount, which was built on the foundation laid by her late father, entertainment mogul Sumner Redstone. In recent years, that effort has focused on growing Paramount's streaming footprint, along with the continued expansion of its core network TV, cable and movie businesses. 

"In 1987, my father, Sumner Redstone, acquired Viacom and began assembling and growing the businesses today known as Paramount Global," Redstone said in a statement. "He had a vision that 'content was king' and was always committed to delivering great content for all audiences around the world. That vision has remained at the core of Paramount's success and our accomplishments are a direct result of the incredibly talented, creative and dedicated individuals who work at the company. Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king."

The merger with Skydance follows what has been a fraught negotiation in which Paramount executives sought to balance the interests of investors who own the company's voting shares — which are primarily controlled by Redstone — and investors with non-voting stock. The latter are represented by large institutional investors such as Berkshire Hathaway and Vanguard, according to financial data firm FactSet.

The deal also follows the April 29 departure of former Paramount Global CEO Bob Bakish, who was replaced by an Office of the CEO led by three division chiefs: George Cheeks, president and CEO of CBS; Chris McCarthy, president and CEO of Showtime and MTV Entertainment Studios; and Brian Robbins, president and CEO of Paramount Pictures and Nickelodeon.

After the initial deal to combine National Amusements and Skydance collapsed on June 11, Paramount's new leadership disclosed plans to cut costs by $500 million, explore a joint venture or other possible partnerships for Paramount+, and sell non-core assets. It is uncertain how that blueprint could change under Skydance's watch. 

In a call with Wall Street analysts on Monday to discuss Paramount's future, Shell said RedBird and Skydance had identified roughly $2 billion in potential cost savings.

In its most recent quarter, Paramount reported an operating loss of $417 million on revenue of $7.6 billion, compared with a loss of $1.2 billion on revenue of $7.2 billion in the year-ago period. Skydance, which is privately held, expects its annual revenue to reach $1 billion in 2024, according to The Wall Street Journal. 

The sale of Paramount also highlights ongoing consolidation within the media space as industry stalwarts like Paramount and CBS seek to compete with much larger competitors, including technology and entertainment companies. 

With Load Shedding No Longer In Effect M-Net's Switch'D On Pop-Up Channels Are Likely To Remain On DStv

Not long ago, it was announced that eMedia Investments would be retiring the Power UP pop-up channel from Openview platforms. This comes after Eskom had managed to minimize the rate in load shedding which saw the viewership plummet for eMedia's linear offering. 

Consumers are advised to tune in to their favourite shows on its respective channels. But as load shedding dimmers one is curious on when or if MultiChoice plan to follow soon with Switch'D On.

Back in 2022, both eMedia Investments and MultiChoice unveiled their respective brands for consumers. This came as Eskom high rates of load shedding led some businesses to close if not lose revenue with these channels built to recover those lost hours.

Since last year, MultiChoice was testing out a possible power bank feature to keep TV sets and DStv decoders on during load shedding. It is currently unknown when this product will be available but from what we assume Switch'D On could remain for the time being. 

MultiChoice Zambia revived the former Zambezi Reloaded as an anti load shedding channel following its closure in Malawi. Both these regions reside in Southern Africa which is where Switch'D On would be applicable in such circumstance.

Openview Dumps Power UP! Pop-Up Channel

With recent improvements in power stability, Openview announces discontinuing the Power-Up! Channel (Channel 114 on Openview) from Monday, 8 July 2024. Launched as a beacon of light during the challenging times of load-shedding, Power-Up! provided 18 hours of daily entertainment, ensuring South Africans never missed their favourite shows. Now, uninterrupted entertainment will continue on e.tv.

Power-Up! was an innovative solution to help e.tv viewers stay entertained despite the power outages. With load-shedding no longer affecting our lives, viewers can continue to enjoy their favourite shows as they air, experiencing the excitement of live viewing with friends and family. 

Marlon Davids, Managing Director of Channels: "We are thankful to our viewers for their ongoing support. Your engagement has been invaluable, and we are excited to bring you an even more thrilling prime-time experience. Our commitment to providing nonstop entertainment has always been unwavering and will continue to be so."

Openview is SA’s first free-to-air satellite service, offering a variety of TV and radio channels catering to all ages, races, and genders across South Africa. Openview is currently in more than 3.5 Million Homes in South Africa. The decoder is purchased as a once-off cost and has no monthly payments, affording millions of South Africans access to world-class entertainment.

Skydance Media Gets Board Committee Approval For Control Of Paramount Global After Lengthy Chase

David Ellison‘s Skydance Media has gained a key approval vote for the company’s proposed acquisition of Paramount Global controlling shareholder National Amusements Inc. after seven months of talks.

The deal was blessed Sunday by a special committee of Paramount’s board of directors, a person familiar with the matter told Deadline. A formal announcement is expected as soon as Monday morning.

Bloomberg News earlier Sunday was the first to report on the special committee vote.

While the board committee action is a milestone, one of the features of the current agreement is a 45-day “go-shop” provision, which allows NAI chief Shari Redstone to field alternative offers. Apollo Global Management, Barry Diller and Edgar Bronfman Jr. are among those who have explored bids. Apollo, both on its own and in partnership with Sony Pictures, has submitted formal offers in recent months but they haven’t gained much traction.

Under terms of the Skydance agreement, Redstone and her family will receive $1.75 billion, with additional funds going toward Paramount debt repayment. The transaction is expected to be the first of two parts, with a full merger between Skydance and Paramount Global to follow. NAI controls nearly 80% of Paramount’s Class A, or voting, shares. It holds only about 10% of its equity value, with that disparity adding to the complexity of deal negotiations in recent months.

Skydance is a longtime partner with Paramount Pictures as a co-financier on marquee franchises like Mission: Impossible, Star Trek, Transformers and Top Gun. Along with the 112-year-old movie studio, Skydance will gain control of a portfolio including CBS, Nickelodeon and Paramount+. Unlike other bidders aiming to break up the company, Skydance is seen as wanting to preserve the entity in much the same shape as it currently exists, though there will undoubtedly be significant cost cutting. That strategic vision helps explain Redstone’s longtime preference for Skydance over some other suitors, according to sources familiar with the deal talks.

Less than a month ago, it seemed that any hope of the parties reaching a deal had evaporated. Redstone pulled out of a planned deal at the 11th hour over concerns regarding her net proceeds and exposure to shareholder lawsuits. While earlier Skydance overtures caused Paramount’s already battered stock to sink even lower due to concerns about shareholder dilution, the most recent go-round has boosted the share price. In Hollywood and media circles, the Paramount M&A watch has punctuated a period marked by existential anxiety and fears emerged of another major studio poised to disappear in the wake of Fox’s absorption by Disney.

Ellison and his backers (reportedly including his father, billionaire Oracle founder Larry Ellison) were undaunted by Redstone’s last-minute reversal in June. Parting with the media empire built by her father, Sumner Redstone, has never been an easy process. Shari Redstone, after taking the reins a decade ago as Sumner Redstone’s health declined, succeeded with signature initiative, bringing Viacom and CBS back under the same corporate umbrella after multiple attempts. The merger of the companies into what is now Paramount Global closed in December 2019.

The triumph of shepherding the merger turned out to be short-lived, with Covid and numerous other difficulties piling up as two companies became one. Today, Paramount faces considerable challenges on many fronts. The company, which is a fraction of the size of top media rivals Disney and Comcast, is straining to make a profit in streaming as it confronts secular declines in its linear TV business and an unsettled moviegoing climate. While Paramount shares have enjoyed an uptick on the merger news, they are still worth less than one-third what they were when Viacom and CBS came together.

As the company has explored various M&A scenarios, it has also jettisoned longtime CEO Bob Bakish in favor of a tripartite Office of the CEO consisting of veteran execs George Cheeks, Chris McCarthy and Brian Robbins. At the company’s annual shareholder meeting and a subsequent town hall with employees last month, the execs laid out their strategy, which consists of reducing expenses (targeting $500 million in annual cost savings), maximizing the asset portfolio and exploring streaming partnerships or joint ventures. Just before the most recent Skydance news broke last week, there were reports of Paramount in talks to sell BET and discussing a streaming partnership with a third party.

“While we recognize that this is not a traditional management structure, we are confident that it will enable them to move quickly to implement best practices throughout the company and to drive improved performance,” Redstone said at the annual meeting.

As the Office of the CEO gets set to pass the baton (former NBCUniversal CEO Jeff Shell is waiting in the wings as part of the Skydance bid), yet another round of downsizing will reshape the company’s workforce. At the end of 2023, the company had 21,900 full- and part-time employees.

“We’d like to take a moment to acknowledge the challenges of all the M&A speculation surrounding our company,” Robbins said during the town hall. “We know what a difficult and disruptive period it has been. And while we cannot say that the noise will disappear, we are here today to lay out a go-forward plan that can set us up for success no matter what path the company chooses to go down.”

Candle Media Restructures, Folding Animation Into Moonbug As Hello Sunshine Chief Sarah Harden Takes Over Rebranded Studio

Blackstone-backed “next generation” entertainment group Candle Media is tightening belts amid the streaming downturn, enacting a series of cost-cutting measures and reorganization of its acquisitions. The outfit will split into two divisions, folding its animation business into CoComelon studio Moonbug (which Candle acquired in November 2021 for nearly $3 billion), while live-action projects are collected under the rebranded Candle Studios.

Sarah Harden, formerly chief of Reese Witherspoon’s Hello Sunshine label (acquired by Candle in August 2021 for $900 million), will head the live-action division rebranded as Candle Studios (also including prodcos Exile, True Stories and Faraway Road). The parent company, established in 2021 by Disney alums Kevin Mayer and Tom Staggs with a $1 billion investment from Blackstone, dissolved Hello Sunshine’s animation division into Moonbug last year.

Candle set up to fill demands of streamers as major studios began damming up their content to reserve for their own platforms, paying hefty sums to acquire popular brands. In an interview with Semafor Tuesday, Mayer said that this angle on approaching streaming buyers was “the one thesis that is holding true, though it’s fraying around the edges slightly.” The co-CEO agreed that Candle had paid “at the top of the market” for its acquisitions. “Have the financials borne out the way we would like, to have to support the prices that we paid? Probably not,” he admitted, adding optimistically, “Talk to us in two or three years.”

A Blackstone spokesperson also told Semafor that one of the biggest impacts on Candle’s financial state were the dual Hollywood strikes by SAG and WGA last year. The company also carries about $1.4 billion in debt, which at 12% is consuming most of its earnings. “We continue to be optimistic about [Candle’s] prospects coming out of the work stoppages and look forward to supporting its growth,” the investor rep noted.

Semafor‘s Ben Smith points out, “Moonbug has almost single-handedly saved [Candle Media]. Despite a drumbeat of questions from the industry about the company’s strategy, properties including CoComelon make Candle a powerhouse in children’s media, a great business on YouTube, and has a solid foothold in streaming.”