Paramount Global/Skydance merger - New York Post: Shari Redstone’s refusal to sell Paramount to Skydance won’t keep her away from the negotiating table for long

Story from New York Post:

Maybe the biggest tell that traditional media is heading for the ICU isn’t that after months of intense negotiations, Shari Redstone did something weird and refused to sell her fading empire to a company known as Skydance.

No, it’s that a lot of smart media people, including those involved in the negotiations, believe that when Shari is faced with the cold, hard facts about the business she inherited from Pops, the late media mogul Sumner Redstone, she will likely be back at the bargaining table.

She simply has nowhere else to go.

I know what you’re saying: Aren’t there other bidders for her “controlling stake” in Paramount? Sorry, if you know the business, it’s not exactly an awe-inspiring group.

Less awe-inspiring: Paramount is run by three executives all effectively reporting to Redstone, who during her time taking over the family business has squandered billions of dollars in stock market value. Then there’s Paramount’s main drivers of business — CBS, NFL TV rights, local stations, MTV, BET and Nickelodeon — all getting crushed by cord cutting. Its studios suffer from a lack of interest in going to the movies. The streaming service still loses money.

That’s why Paramount’s stock lost what’s approaching $1 billion in market value in the immediate aftermath of Shari pulling a 180, literally saying no last Tuesday to a deal with her family’s fortune on the line.

Is Redstone simply incompetent? Maybe, but consider: All traditional media are suffering and in need of a savior. Analyst Rich Greenfield recently posted on social media that Netflix’s market value is bigger than the top four media content providers combined.

Yes, Paramount is just the weakest of a weak bunch but that doesn’t mean Shari likes being treated like a piker. What pushed her over the edge to deep-six a deal that was literally about to be approved by the Paramount board is that she felt Skydance was nickel-and-diming her.

It was Shari’s view — and it’s not a stretch — that Skydance has the money to pay her what she wants. The company is run by movie producer David Ellison, who has the same name as Oracle Chairman Larry Ellison because they are father and son. Last I checked (and Shari as well), Larry is one of the world’s richest men with a net worth of more than $150 billion, which means he has more than enough dough to back up his son’s ambitions to own a media company and handle Shari’s side of the trade.

But they didn’t in part because of the weird way the Redstone family controls Paramount. Shari “owns” the company through a bit of financial alchemy, devised by her dad, holding so-called voting or controlling shares.

That makes any potential sale of her stake a bit wonky because there are common shareholders of Paramount as well. They always threaten to sue, and they did in this case as well because they initially got next to nothing. So Skydance began to come up with ways to make the commons happy at Shari’s expense, pushing her payout down to close to $2 billion, and then refusing to indemnify her if there were lawsuits.

I’ve interviewed people on all sides of the drama, and they all offer variations of the same story; Paramount board members who don’t like the Ellisons whispering in Shari’s ear killed the deal; Shari being too emotional about letting her baby go ultimately scuttled it.

But one thing is certain: Nobody likes to get penny-pinched. Based on what I can suss out, David and his deal partners at RedBird Capital didn’t give cutting Shari’s payout a second thought; they believed she had no choice but to sell as her melting ice cube of a media company was slowly dissipating and other buyers either didn’t have the money or faced regulatory hurdles.

That makes sense on paper. What doesn’t is that David Ellison and Shari weren’t on speaking terms for weeks before she pulled out, which is always a bad sign for any acquisition.

Recall: David began wooing Shari months ago presumably because he really wants Paramount’s properties and media-mogul status. Then they just stopped talking as the terms began to change. In dealmaking, silence is never golden; you got to approach it like you’re asking the homecoming queen to the prom. And you turn on the charm.

David Ellison didn’t do that. His people say it’s not his fault; lawyers recommended he stay away. Either way, that’s why he got dumped. He failed dealmaking 101. I chalk it up to inexperience since this is David’s first big dance. But his deal partner, RedBird, is run by veteran media banker Gerry Cardinale, one of the best in the business who has more EQ (emotional intelligence) than anyone on Wall Street, so you would think he would have intervened. My reporting shows he didn’t.

Again, Cardinale and the Skydance people think Shari doesn’t have a lot of good options — and she will be back with a weaker hand, my sources say.

But they were wrong before and they are dealing with a Redstone; lots of family drama went into Shari running the place that we don’t have the space to get into here.

Shari has an ego. Also, let’s just posit that she learned a few things from her old man. She knows David really wants to build a media empire and he has daddy’s money to do so.

That brings us to a different family drama at Skydance involving the Ellisons. The negotiations were long and protracted, and I hear Larry wasn’t crazy about Shari’s last-minute reversal. He might not want to back the deal for his kid even if she comes back to the table.

Or maybe Larry does his own 180 if Shari does come back and shows her the money to make his son the next Sumner Redstone.