Scions of Billionaire Families in Talks for Complex Media Merger as Paramount’s Future Hangs in the Balance
In a high-stakes move that could reshape the landscape of Hollywood, two scions of billionaire families are engaged in negotiations for a complex media merger. David Ellison, the founder and CEO of Skydance, is in talks with media mogul Shari Redstone to acquire National Amusements (NAI), a privately held cinema company that controls 77 percent of Paramount’s voting stock. The potential deal has sparked excitement and speculation within the industry, as the future of the iconic Paramount studio hangs in the balance.
Preliminary due diligence on the potential deal has already begun, signaling the seriousness of the negotiations. If successful, this merger would bring together Skydance’s growing independent studio with one of Hollywood’s most celebrated businesses. Paramount, with its legendary lot on Melrose Place and a library of films that spans over a century, is considered one of Tinseltown’s crown jewels. However, the studio is burdened with declining legacy television assets and a heavy debt load.
The partnership between Ellison and Redstone may seem unlikely at first glance. Redstone, a 69-year-old Boston native and daughter of the late Sumner Redstone, is almost three decades older than Ellison, who is the son of Oracle co-founder Larry Ellison. However, both executives have spent the past decade trying to prove themselves under the shadow of their larger-than-life billionaire fathers. Ellison, initially viewed as an outsider in Hollywood, has successfully co-produced several hits and built Skydance into a $4 billion company. A Paramount deal would catapult him into the upper echelon of power players in the industry.
Redstone, from the third generation of a family that inspired HBO’s Succession, has faced skepticism about her readiness to run the media group. However, since gaining control of NAI in 2018, she has worked tirelessly to confound her critics. Selling NAI would mean relinquishing control of a company that has been in the family for nine decades. The decision to explore a sale may be influenced by the tougher industry landscape, with the rise of cord-cutting and the shrinking traditional TV business. Additionally, Redstone has been dedicating more of her time to fighting antisemitism, following the October 7 Hamas attack on Israel.
While Skydance’s negotiations with Redstone are the most advanced, other potential bidders have expressed interest in NAI. Private equity group Apollo and media entrepreneur Byron Allen are among those eyeing the company. Allen recently made a $14.3 billion bid to buy all of Paramount’s outstanding shares, causing a surge in the studio’s stock price. However, questions remain about his ability to finance the deal.
The proposed deal between Skydance and NAI is unique and complex. Skydance plans to take control of Paramount by first acquiring NAI and then merging Paramount with Skydance. This approach is more cost-effective for Ellison, as it avoids the need to buy out the common stock of Paramount, which is valued at over $9 billion. However, this process could potentially trigger lawsuits from Paramount shareholders who feel disadvantaged by the deal.
NAI, founded by Redstone’s grandfather, owns 73 cinemas primarily in New England, but also has holdings in the UK, Brazil, and Argentina. While the company has been modestly profitable, its main source of income is the generous dividend paid for its holdings of Paramount stock. However, NAI’s finances took a hit during the Covid-19 pandemic, as its cinemas business suffered losses. Moody’s recently downgraded NAI’s debt rating, citing a heightened risk of default.
The future of Paramount has been a topic of speculation for some time. The studio is viewed as too small to compete with larger tech groups and media conglomerates dominating the industry. It also faces the challenge of declining TV assets and an unprofitable streaming service, Paramount+. Skydance, if successful in acquiring Paramount, may consider selling off certain assets, such as television network CBS, to restructure the company and monetize parts of the business that do not align well.
While there is no guarantee that any of the potential bidders will emerge as the new owner of Paramount, the fact that Redstone is open to selling has sparked interest from a wider pool of potential buyers. The outcome of these negotiations will undoubtedly shape the future of Paramount and the broader Hollywood landscape. As the talks progress, industry insiders and investors eagerly await the next chapter in this complex media merger saga.