Paramount Lets Skydance Exclusivity Window Expire With No Deal

Paramount Global’s special committee of independent directors has informed Skydance Media that it will let the exclusivity window on the two parties’ merger discussions expire with no deal ahead of a Friday evening deadline, an individual with knowledge of the matter tells TheWrap.

The development signals that a deal between the two parties is unlikely to happen, and for the moment Paramount will remain an independent company in a challenging environment.

David Ellison’s media giant has been in talks about a potential two-step deal that would see the company acquire Paramount through controlling shareholder Shari Redstone’s majority stake in National Amusements, which owns 77% of the media conglomerate’s voting stock. If it moved forward, the second step would see Skydance and Paramount merge to create a combined company valued at around $5 billion.

The development signals that a deal between the two parties is unlikely to happen, and for the moment Paramount will remain an independent company in a challenging environment.

Representatives for Paramount, the special committee and Skydance declined to comment. The New York Times was the first to report the development.

Earlier this week, Skydance submitted a revised, sweetened offer — saying it would add a $3 billion cash injection and premium for non-voting class B shares  — in an effort to assuage minority shareholders’ concerns about the bid prioritizing Redstone at the expense of everyone else and diluting the value of their own holdings.

Notable investors like Ariel Investments’ John Rogers Jr. and GAMCO Investors Inc. chairman and CEO Mario Gabelli, have also both previously warned that they could pursue litigation if the Skydance deal or any other bid does not appropriately benefit their clients.

“Shari finally recognized she didn’t want to be in years of litigation,” the individual said.

The company, which is valued at about $4 billion and has been co-producer with Paramount on projects including “Top Gun: Maverick,” began kicking the tires on the media conglomerate’s assets back in December.

In addition to Skydance, Sony Pictures Entertainment and Apollo Global Management have submitted a non-binding, joint $26 billion all-cash offer for Paramount. That deal would see Sony take a majority stake and operational control, while Apollo would take a minority stake. However, such a deal would likely face scrutiny from regulators due to limitations surrounding foreign ownership.

Any deal must be approved by the Paramount’s board independent special committee. Last month, four members of the board — including three who were on the independent special committee — said they would not seek reelection at Paramount’s June 4 annual meeting.

An individual familiar with Redstone’s thinking told TheWrap that she is open to finding a deal in the best interests of Paramount shareholders and supports the committee reviewing the Sony-Apollo bid.

There’s also the scenario in which Paramount continues to go it alone. Following the resignation of CEO Bob Bakish, the company created an Office the CEO comprised of CBS CEO and president George Cheeks, Paramount Media Networks CEO and president Chris McCarthy and Paramount Pictures and Nickelodeon CEO and president Brian Robbins, which is in the process of creating a long-term strategic plan.

“It’s a really difficult, challenging time,” Cheeks said during a news briefing with CBS Entertainment president Amy Reisenbach this week. “You read articles every day. But I think what’s good about this team is that we all locked arms and said, ‘We can only control what we can control.’ What we can control is helping to develop great shows, hit shows and being number one. I’m blown away by this team every single day, especially right now when you have to deal with all that noise out there — by the way, not just with this company, but in the larger industry. It’s just amazing to me how well we’ve all aligned and come together and focused on what we do every day.”

Paramount shares, which closed at $12.88 per share on Friday, are up more than 2% in after-hours trading. The company has $14.6 billion in long-term debt and reported a market capitalization of $9.05 billion as of Friday’s close.