Paramount and Skydance have haggled for months over an ambitious merger that would create a new ruler of a sprawling media kingdom that includes CBS, MTV and the movie studio behind “Top Gun.”
Talks reached even greater intensity last week, but at least one major point of friction has emerged between Shari Redstone, Paramount’s majority shareholder, and Skydance. In the event that Paramount investors sue over the merger, which party will have to defend the deal in court?
National Amusements, Paramount’s parent company, wants Skydance to provide legal protection in the event of a lawsuit, preventing shareholders from raising objections to the merger, according to three people familiar with the matter. Skydance has not yet signed the terms of the agreement.
Legal protection – also known as indemnification – is one of the crucial outstanding terms of this deal, which has already been condemned by some Paramount shareholders who protested that it would enrich Redstone at the expense of other investors.
The deal could still fail. There are several outstanding issues in the negotiations between Skydance and Paramount, which have recently resumed talks. A special committee of Paramount’s board of directors supports a deal with Skydance. (Puck previously reported that the special committee had given the green light to the deal.)
Another issue still to be resolved is whether Paramount will be given a “buyout” period to see if it can get a higher offer than the Skydance deal or put the deal to a shareholder vote, according to two people familiar with the deal. affair. A shareholder vote and “buyout” period would protect Paramount and National Amusements from lawsuits, but could prolong the negotiation process.
Paramount is under increasing pressure to reach a deal. As the traditional television industry comes under increasing pressure, Paramount has struggled to transition into the streaming business, losing hundreds of millions of dollars a year.
Skydance recently improved its offer to acquire Paramount: it agreed to put up a minimum of $1.5 billion to pay off the debt on Paramount’s balance sheet.
Paramount and Skydance also agreed to make a takeover bid that would allow non-voting shareholders to sell their shares for $15 each, The Wall Street Journal reported Sunday.
Skydance, a Hollywood studio run by tech scion David Ellison, is the producer of film franchises such as “Mission: Impossible” and “Top Gun.” Under the terms of the deal now being discussed, Skydance would buy Redstone’s stake in National Amusements and then merge with Paramount.
An increasingly unlikely outcome is a direct takeover by a rival. Sony Pictures Entertainment and private equity giant Apollo Global Management recently filed a non-binding letter expressing their intention to acquire Paramount for $26 billion in cash, and the two companies have been discussing a deal. But Sony has backed away from its initial proposal and is instead exploring different approaches to the acquisition.
Many of Paramount’s investors have come out against a deal with Skydance, saying it would enrich Redstone at the expense of other shareholders. The deal would ensure that Redstone would receive additional pay in exchange for its voting influence, typically called a control premium, which many shareholders have argued is unfair. Some have threatened to sue.