Paramount Global + Skydance = No Deal

Paramount Global Chair Shari Redstone walked away from a deal to sell her family’s media empire to independent producer David Ellison, but she’ll have to agree to an offer from someone eventually, because keeping the status quo isn’t an option.

Bloomberg reports the heiress rejected Ellison’s latest proposal on Tuesday after lengthy negotiations and a professed preference for the deal she believed would be in the best interests of her family and the company’s legacy. After months of resistance from company management and shareholders that prompted Ellison to revise his offer, Redstone changed her mind.

She’ll have to come up with an alternative pretty quickly, however, as the problems that have bedeviled Paramount for years won’t go away on their own.

Shari Redstone

Laden with more than $14 billion in debt, Paramount has struggled to compete in streaming and has suffered as cable TV audiences canceled their subscriptions and abandoned traditional channels like CBS and Nickelodeon. Its namesake Hollywood studio, home to films such as The Godfather and Forrest Gump, has struggled to make money.

The Redstone family holding company, National Amusements Inc., has nearly $200 million in debt and lacks the cash to repay what’s owed in May, according to S&P Global Inc. Down the road, the family has estate taxes due after the passing of patriarch Sumner Redstone in 2020.

National Amusements, which owns 77% of the voting stock of Paramount, could still sell assets, such as some of its Paramount shares. But that is unpalatable based on current prices. At $11.04 a share, Paramount stock is trading at a fraction of its 2017 high of $69.36. The stock fell almost 8% on Tuesday after news of the abandoned Skydance offer.

After reviewing Ellison’s proposal in May, a special committee of directors recommended that Paramount not continue as a standalone business, according to people familiar with the decision.

Ellison, the son of Oracle Corp. co-founder Larry Ellison, changed the terms of his initial offer in an effort to appease not only the Redstones but also Paramount shareholders. Ellison threw in more money for shareholders and cash to pay down debt, and also offered to help cover potential legal costs.