Paramount, Skydance said to be in exclusive merger talks as Apollo tables $26bn bid

Paramount Global and Skydance have entered into an exclusive 30-day negotiating period as the companies look to hammer out a merger deal, according to a report in the Wall Street Journal (WSJ).

David Ellison

The negotiating agreement sees New York-headquartered Paramount Global pause talks with other companies as it focuses solely on reaching an agreement with Skydance, led by CEO David Ellison.

WSJ said the companies have already loosely agreed terms. However, given Paramount Global’s position as a subsidiary within Shari Redstone-led parent company National Amusements, Skydance is looking for assurances that it can complete a deal to merge the companies.

The publication said Paramount Global’s board favours a deal with Skydance over one with private equity firm Apollo Global Management, which reemerged as an interested party last month.

According to WSJ, Apollo offered to buy the entire company for US$26bn this past weekend, including its debt, after it previously offered US$11bn to buy just the film and TV studio.

However, Paramount’s board has chosen to begin exclusive talks with Skydance as it “wasn’t clear how Apollo would finance its bid,” said WSJ, citing sources with knowledge of the talks.

WSJ’s report about talks advancing prompted Paramount stock to surge by nearly 15% in the final 30 minutes of trading on Wednesday, closing at US$13.52 per share after opening at US$11.87.

The value of the stock has fallen from around US$22 per share a year ago and US$37 per share two years ago. The company’s market capitalisation stands at around US$8bn, although it jumped to more than US$9bn following WSJ’s report.

Talks between Skydance and Paramount have been going on for months, in part because of the complexity of the deal being discussed.

Under the proposed two-step deal, Skydance would first acquire Paramount’s parent company, National Amusements, controlled by Shari Redstone, and after that merge Paramount Global and Skydance. However, the second part of the deal requires approval from an independent committee of directors at Paramount, with Skydance wanting assurances that it will be able to merge with Paramount if it first acquires National Amusements.

During the talks, Paramount Global has been scaling back its content business, laying off staff and offloading assets as it looks to reduce a debt pile that stands at almost US$15bn.

Over the past seven months, it has sold book publishing company Simon & Schuster and mixed martial arts promotion Bellator, laid off more than 800 people, pulled back on non-US programming and sold its minority stake in Indian media company Viacom18 for US$517m.