After months of negotiations, Paramount Global’s controlling shareholder Shari Redstone has broken off merger talks with David Ellison‘s Skydance.National Amusements has “not been able to reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI,” said the Redstone family trust that controls Paramount.“NAI is grateful to Skydance for their months of work in pursuing this potential transaction and looks forward to the ongoing, successful production collaboration between Paramount and Skydance.“NAI supports the recently announced strategic plan being executed by Paramount’s Office of the CEO as well as their ongoing work and that of the Company’s Board of Directors to continue to explore opportunities to drive value creation for all Paramount shareholders.”The two sides have been deep in discussions during and after a one-month exclusive negotiating period in April and Redstone at one point had favored the deal, which would have paid her a premium and also kept the businesses together, at least initially. The proposed transaction called for Skydance to acquire Redstone’s NAI, gaining control of Paramount, and then see Par and Skydance merge.As recently as this past weekend, talks were intense but there were a few major sticking points. One is said to center around who would assume potential legal liabilities in the likely case of shareholders lawsuits.Paramount Global stockholders vocally disliked the Skydance deal from the start and threatened to sue. Skydance, backed by Larry Ellison and Gerry Cardinale’s RedBird Capital, revised the deal several times to sweeten the pot for them, but they still weren’t enamored.Meanwhile, a few other bidders had emerged to acquire Shari Redstone’s controlling stake in a deal that would be a change of control of the publicly traded company, but not a merger. Producer Steven Paul put together a group of deep-pocketed investors and is interested. And former Universal chief Edgar Bronfman Jr, backed by Bain Capital, is also looking at a deal. Paul at least, a friend of Redstone, was regarded as a stalking horse by many — a bidder encouraged by a company, in this case Paramount, to lob an offer and pressure other parties.With Skydance out, Paul and Bronfman are now higher profile. The offers are only for Redstone’s controlling stake in Paramount, which would be the simpler way for her to go.Sony and private equity giant Apollo early on had considered a joint $26 billion bid for the entire company, which would have been another way and one beloved by stockholders. That bid has since been scaled back and Sony is still doing due diligence (an examination of Paramount books, like Skydance did) for some kind of smaller transaction.Paramount, which has struggled due to cord-cutting and linear TV’s difficulties, has been the subject of M&A talk since last fall. Skydance, which has co-financed a number of film and TV projects with Paramount Pictures, was the first outside entity to emerge as a legitimate suitor.The process has been messy and very public. Amid all of the takeover speculation, former Paramount CEO Bob Bakish departed in April, weeks before four board members stepped down. Reports tied the directors’ exits to frustration with the Skydance deal. Bakish was replaced by the Office of the CEO referred to above and comprised of top Paramount executive Brian Robbins, George Cheeks and Chris McCarthy.
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