Investing.com -- Paramount Global suffered a turbulent week as it fielded offers from potential suitors that culminated in a tentative agreement to merge with Skydance in deal that as it complex as it is unusual, leaving some questioning whether the end justifies the means.
Under the terms of deal, which still has a few kinks to work out, Skydance, David Ellison’s media company, plans to merge its assets and new equity with Paramount and own either a majority stake or a substantial minority stake in company, CNBC reported, citing sources. To get the merger over line, Paramount would need to raise as much as $3 billion in new equity, CNBC reported Thursday.
The Skydance consortium including private equity partners RedBird Capital Partners and KKR would own a 45% or just over 50% stake in the combined entity, the sourced told CNBC.
The combined entity would be led by Skydance CEO David Ellison, whose father Larry Ellison, co-founder and chairman of Oracle (NYSE:ORCL) is expected to help finance the deal.
Skydance has a tentative deal in place to acquire Shari Redstone’s 77% voting stake of National Amusements, the family holding company that controls Paramount Global, the Wall Street Journal reported, citing sources. But merging with Paramount Studios would require permission from an independent committee of directors.
"The board has a fiduciary responsibility to consider the value delivered to all shareholders, not just those with voting power. It is unclear what Ellison’s intentions are for the rest of the company," MoffettNathanson said in a note.
The layer of complexity has many questioning why Apollo's more conventional $26 billion takeover bid for the Paramount was rejected. Paramount's management had questions about how Apollo planned to finance the deal, the WSJ reported, but MoffettNathanson suggests it may have been an "attempt to play down expectations about the relative value of their favored suitor."
For now, however, the tentative deal has bought Skydance some time, or 30 days, to work out the terms of the deal and make its case on how it plans to take this legacy media and entertainment into the future.
Paramount Global Class B (NASDAQ:PARA) fell 3% on Friday, but is down 17% year to date.
Begin trading today! Create an account by completing our form
At One Financial Markets we are committed to safeguarding your privacy.
Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.
Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.
Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.
By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.