Why Shari Redstone went cold on a Paramount sale to Skydance
Why did Shari Redstone ultimately decide to pull out of the deal with Skydance Media?
Shari Redstone ultimately decided to pull out of the deal with Skydance Media due to a combination of factors. Among them were concerns about changes to the deal terms that would have meant less money flowing to the family's holding company, National Amusements Inc. Additionally, Redstone wanted to be indemnified from costly shareholder lawsuits and give other shareholders the ability to weigh in, which was a sticking point for Skydance. Furthermore, other suitors had emerged, offering to buy just National Amusements and its controlling Paramount shares, which would have represented a more straightforward transaction. The Redstone family anticipates a better offer for NAI will soon materialize.
What were the main reasons Shari Redstone initially pursued the sale of Paramount Global to Skydance Media?
Shari Redstone initially pursued the sale of Paramount Global to Skydance Media for several reasons. Firstly, she was unhappy with Paramount's sluggish stock performance and the downgrade of its credit to "junk" status. Secondly, she believed that David Ellison's Skydance Media, backed by private equity firms RedBird Capital and KKR, would be a suitable partner to help restore Paramount to its former greatness. Additionally, the proposed deal would have provided a significant premium for the Redstone family's controlling shares in Paramount.
However, the deal faced resistance from Paramount's then-CEO Bob Bakish and several board members, as well as investors who were unhappy with the terms that would have given the Redstone family a richer payout than other shareholders. Despite these challenges, Shari Redstone remained determined to push the deal through, even sacking Bob Bakish and several board members in the process.
Ultimately, Shari Redstone decided against the Skydance deal due to changes in the deal terms that would have meant less money for the family's holding company, National Amusements Inc. Additionally, Redstone wanted to be indemnified from costly shareholder lawsuits and give other shareholders the ability to weigh in, which was a sticking point for Skydance.
How did the terms of the deal change to provide more benefits to common shareholders, and what was the financial impact on the Redstone family's holding company, National Amusements Inc.?
The initial deal between Skydance Media and Paramount Global was structured in such a way that the Redstone family, through their holding company National Amusements Inc. (NAI), would receive around $2 billion for their controlling stake in Paramount. However, this deal faced opposition from Paramount's independent board directors and common shareholders, who complained that it provided a rich premium for the Redstone family at the expense of other investors.
In response to this opposition, the deal was restructured to provide more benefits to common shareholders. The revised terms included a smaller payout for the Redstone family, reducing their expected payment to about $1.7 billion after NAI's debt was paid. This change was made to address the concerns of common shareholders and make the deal more appealing to them.
However, this change in deal terms was not well-received by Shari Redstone, who was reportedly unhappy with the reduced payout for her family's holding company. This dissatisfaction, along with other factors, eventually led to the collapse of the deal between Skydance Media and Paramount Global.