Skydance Media and Paramount Reach New Merger Agreement

Photo from Hannah Wernecke via Unsplash

Skydance Media and Paramount Reach New Merger Agreement

By Movieguide® Contributor

After talks between Skydance Media and Paramount broke down last month, a renewed effort to pen a merger between the two companies has resulted in a tentative deal.

When talks ended in the middle of June, the major holdup came from Paramount’s majority shareholder, Shari Redstone, who was dubious about Skydance’s ability to close the $6 billion deal. Under this new deal, it appears her concern has been addressed, though it remains unseen if the cost of the arrangement has changed.

While the merger between Skydance and Paramount has been tentatively agreed upon, one term believed to be included is a 45-day period for Paramount to shop around for a better deal. Paramount had previously been in talks with Sony, Peacock and Warner Bros. Discovery. This 45-day period makes way for any of these companies to make an eleventh-hour offer.

Paramount’s future has been in question as of late, with the company facing major difficulties with turning a profit. These problems largely lie with the complications of turning over from traditional media to streaming. Over the past three years, Paramount+ lost the company $4.5 billion with another $0.9 billion loss expected for 2024.

To salvage the company, multiple changes have been made including the removal of longtime CEO Bob Bakish who was replaced by a trio of executives as co-CEOs. Before his departure, Bakish placed the blame for the company’s downfall onto broad market issues, such as cord-cutting and inflation. He also introduced a $500 million plan for cost cuts, which the new CEOs have continued.

Despite numerous standout titles from Paramount this year, including KNUCKLES and A QUIET PLACE: DAY ONE, confidence in the company has continued to fall. Year-to-date, the stock price has fallen 28%, dipping under $10 per share when news of the Skydance merger breakdown broke in June. The new deal, however, has reinvigorated confidence with the price rising over 15% in recent days.

Movieguide® previously reported:

Following the breakdown of Paramount’s merger with Skydance, the company’s stock fell below $10 for the first time since Viacom and CBS merged in December 2019.

After months of talks about a deal with Skydance, Shari Redstone, Paramount’s controlling shareholder, withdrew the company’s option to merge with Skydance despite few options elsewhere.

“Without a deal the public now owns a company with: 125% of its EBITDA (earnings before interest, taxes, depreciation, and amortization) coming from the shrinking linear TV business, and the majority of that form general entertainment cable networks; a new 3-person office of the CEO; another round of cost-cutting coming; a likely change to its streaming strategy; and employee base that has already endured 6 months of uncertainty; little appeal for most agents and producers to bring their best material to; a possible rift with the co-producer of its tent-pole films, leverage over 4x and likely to creep up,” said Alan Gould of Loop Capital in a report.

“We assume PARA intensifies its focus to generate cash. At the annual meeting the tri-CEOs announced a $500 million cost-cutting initiative,” he continued. “They will try to find a partner for the streaming business which lost $4.5 billion over the past three years and is projected to lose another $0.9 billion this year.”

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