Paramount and Skydance Sign Merger Agreement to Form $28 Billion Company

Tom Cruise attends the premiere of 'Mission: Impossible—Dead Reckoning Part One' presented by Paramount Pictures and Skydance at Rose Theater, Jazz at Lincoln Center in New York, on July 10, 2023. Bryan Bedder/Getty Images for Paramount Pictures

Paramount Global and Skydance Media have agreed to merge into a new company, with the deal set to be closed in the first half of next year.

The companies, which have funded several Hollywood blockbusters, will merge to create “New Paramount,” according to a July 7 press release from Skydance. The merger will take place through a two-step transaction.

In the first step, Skydance will acquire National Amusements Inc. (NAI), which has a controlling stake in Paramount Global. Then, Skydance will merge with Paramount Global to form New Paramount, which is expected to have an enterprise value of roughly $28 billion. The transaction is projected to be completed in the first half of 2025 after all necessary regulatory approvals are received.

The transaction pays a 28 percent premium for Class A stock per its price on July 1. Class B stock is paid a premium of 48 percent. Companies usually designate shares as Class A or B. Class A shares tend to have more voting rights than Class B.

“The proposed merger creates immediate value, upside opportunity, and stability for all of Paramount’s stockholders and employees during a period of industry transition,” the press release stated.

The deal includes a 45-day “go-shop” period during which Paramount Global is allowed to solicit alternative acquisition proposals from other parties. Skydance and Paramount Global are scheduled to discuss the transaction with securities analysts on Monday.

The following transactions are expected to take place as part of the merger process:

• First, Skydance will invest $2.4 billion to acquire NAI for cash. NAI holds roughly 77 percent of Paramount’s Class A shares.
• Skydance will then invest $4.5 billion in cash and stock to buy Paramount Global’s publicly traded Class A and Class B shares. It will also add $1.5 billion in capital to Paramount Global’s capital sheet.
• Finally, Skydance merges with Paramount Global in an all-stock transaction, forming New Paramount. Skydance will own 100 percent of Class A and 69 percent of outstanding Class B shares in New Paramount. The deal values Skydance at $4.75 billion.

Post-merger, Skydance CEO David Ellison will become the chairman and CEO of New Paramount, while Jeff Shell, the former CEO of NBCUniversal, will be president.

“I am incredibly grateful to Shari Redstone and her family who have agreed to entrust us with the opportunity to lead Paramount,” said Mr. Eillison, son of Larry Ellison who is a co-founder of Oracle Corporation. Ms. Redstone is CEO of NAI and chair of Paramount Global.

“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.”

Paramount’s Weak Cash Flow

Paramount has a history of more than 100 years and owns media brands such as CBS, MTV, Nickelodeon, Paramount Pictures, Paramount+, and Showtime.

The company claims to have a global reach of more than 4.3 billion subscribers across 180 nations. Paramount has funded blockbusters such as “Mission: Impossible–Dead Reckoning,” “Top Gun: Maverick,” and “Transformers: Rise of the Beasts.”

Skydance was founded in 2010 and has been involved in the making of movies such as “Mission: Impossible–Ghost Protocol,” “World War Z,” and “Star Trek Into Darkness.”

The merger deal comes as Paramount’s stock crashed by more than 27 percent in the past year and by almost 78 percent over five years.

In February, rating firm S&P Global put Paramount on negative credit watch by pointing to weaker cash flows.

“We believe FOCF [free operating cash flow] will be weaker than historical levels because the significant cash flows from the linear TV businesses will degrade rapidly as pay-TV subscribers continue to decline and advertisers migrate spending to streaming platforms,” S&P said in a report.

“Its cash-flow declines have been worse than its industry peers because of its smaller scale, less business diversification, and slower DTC [direct to consumer] ramp up.”

Some Paramount shareholders opposed the merger, suggesting that it benefits controlling shareholder NAI at their expense. However, a special committee of Paramount’s board of directors eventually approved the merger agreement.