Paramount will begin exclusive merger talks with Skydance, sources say. By Reuters

Posted by Dawn Chmielewski

(Reuters) – Paramount Global board members agreed on Wednesday to begin exclusive merger talks with Skydance Media, calling the independent studio a better option than the $26 billion offer from Apollo Global Management (NYSE:), people familiar with the matter said. This said.

The deal talks, which are more advanced than the U.S. private equity firm’s proposal, are part of a two-stage process that, if successful, would end Shari Redstone’s control of the media empire built by her father, the late Sumner Redstone.

A special committee of Paramount’s board chose to “pursue the bird in its hand” rather than chase a deal “that may never actually come to fruition,” said a person with knowledge of the board’s actions. Run for 30 days.

Paramount’s stock soared nearly 15% on Wednesday after the Wall Street Journal first reported exclusive talks with Skydance.

Skydance, led by David Ellison, the son of Oracle (NYSE:) co-founder Larry Ellison, is seeking to acquire National Amusements, the Redstone family’s holding company that directly or indirectly owns about 77% of Paramount’s voting stock.

The sale is contingent on Ellison’s ability to merge Skydance with Paramount Global.

Sources said a special committee of Paramount independent directors spent months negotiating with Skydance, and the group’s advisers, Centerview Partners and law firm Cravath, Swaine & Moore, said the two sides would agree to a deal. It added that it recommended engaging in exclusive talks to reach an agreement. transaction.

Skydance declined to comment. Paramount and National Amusements could not be reached for comment.

Apollo submitted a $26 billion all-cash offer to Paramount Global over the weekend, according to three sources familiar with the bid terms.

All sources are not authorized to speak to the media and declined to be identified.

That represents a significant increase from the $11 billion bid earlier this year for the movie studio, the most important of Paramount Global’s media assets. At the end of 2023, Paramount’s enterprise value was approximately $22.5 billion.

Two people with knowledge of Apollo’s offer described it as a “very preliminary” offer, noting that it was not the result of negotiations or diligence but was intended to “delay” a deal with Skydance.

A successful Skydance-Paramount deal marks further consolidation in a media industry where the traditional TV business is declining as viewers gravitate toward video streaming services. The industry is also suffering from the impact of the Hollywood union strike last year and the soft advertising market.

Paramount Global has lost more than $16 billion in value since it was formed in 2019 through the contentious reunion of CBS and Viacom. The company’s market capitalization fell below $10 billion in January.

In January, a source said Ellison was seeking an all-cash bid to acquire National Amusements.