US media firm Paramount Global (PARA:NASDAQ) and Californian-based film and TV production company Skydance Media have finally agreed merger terms, opening a new chapter for one of Hollywood’s oldest studios.
The $28 billion Paramount-Skydance deal is the culmination of months of on-off talks which stalled on 11 June only to resume on 3 July.
Skydance is owned by David Ellison, the son of Larry Ellison who founded US technology giant Oracle (ORCL:NYSE).
Paramount shares reacted positively gaining over 2% to $11.81 in pre-market trading on 8 July.
The proposed agreed merger couldn’t have come at a better time for Paramount.
Not only did Paramount chief executive Bob Bakish leave the company in April after rumours of a merger circulated, but over the past year the shares have fallen by 27%.
Paramount’s global streaming service Paramount+ has also just announced price hikes from 20 August for new customers and 20 September for existing ones.
With just 63 million customers, Paramount+ trails behind other streaming platforms like Netflix (NFLX:NASDAQ), which has 247.2 million subscribers, and Amazon’s (AMZN:NASDAQ) Prime Video with 200 million subscribers.
The Skydance merger could improve Paramount’s chances of competing more effectively in streaming, combining the studio behind such classic films as Chinatown, The Godfather and Breakfast at Tiffany’s with its financial partner on several major recent films, including Top Gun: Maverick, Mission: Impossible-Dead Reckoning and Star Trek Into Darkness.
Paramount also owns the television network CBS and channels including MTV, Nickelodeon, and the UK’s Channel 5 with over 4.3 billion subscribers in more than 180 countries.
Under the terms of the agreement, Skydance will invest around $8 billion in Paramount including a $2.4 billion payment to National Amusements, Paramount’s controlling shareholder.
National Amusements, led by Shari Redstone, who is president and non-executive chairwoman of Paramount Global, holds nearly 80% of the voting shares in Paramount.
Common shareholders in Paramount will receive $15 a share, while those holding A shares will receive $23 a share.
The deal marks the end of an era for the Redstone family after the Paramount group was founded by Shari Redstone’s grandfather in 1936.
However, the deal is by no means done and dusted: Paramount’s advisers have 45 days to entertain rival bids, while the tie-up is also subject to regulatory approval according to the Financial Times.
Other suitors for the business includes US private equity giant Apollo Global Management (APO:NYSE) and Japanese electronics-to-entertainment firm Sony Group (6758:TYO).
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