Why Shari Redstone Cooled Down During a Paramount Sale at Skydance

For seven months, media mogul Shari Redstone campaigned for Paramount Global executives to embrace her plan to sell the popular media company to tech scion David Ellison.

Bob Bakish, then Paramount’s chief executive, and several board members resisted. Investors howled that the Ellison deal would give Redstone and his family a hefty premium for their controlling shares of Paramount – to the detriment of regular shareholders. Undeterred, Redstone fired Bakish, his longtime lieutenant, and four board members were shown the door.

By Saturday evening, the Redstone family and Ellison’s Skydance Media had agreed to important terms. Ellison – the son of tech billionaire Larry Ellison – was poised to win his hard-fought prize. Weary Paramount employees checked their emails, expecting a major announcement to come out at any moment. The independent directors have scheduled a meeting at 11:30 a.m. Tuesday to formally review the deal.

But just as the meeting was getting underway, Redstone called with some surprising news.

The Skydance deal was dead.

Redstone’s change of heart, after months of drama and tension spilling into the public eye, was the culmination of several forces at play behind the scenes, according to seven people familiar with the matter, who were not authorized to comment on the discussions. internal.

Redstone’s adult children — who are set to inherit the family fortune — had initially advocated for the Skydance deal, according to two of the sources. But as the month began, the matriarch grew increasingly uneasy.

On Monday, three sources reported that Redstone and his children had agreed to keep their inheritance, bringing an abrupt end to one of the industry’s most calamitous auctions.

“It’s Shari’s company,” said an insider. “She had been kicking and clawing for control, and she just wasn’t ready to let go.”

What motivated Redstone’s overthrow?

The 70-year-old tycoon was unhappy with changes to the terms of the deal that would have meant less money for the family’s holding company, National Amusements Inc., two sources said.

The family initially hoped for about $2 billion for NAI, which owns 77% of Paramount’s voting stock. But the deal was restructured (with the Redstone buyout) to provide more money to common shareholders, which would have left the family with about $1.7 billion after paying NAI’s debt, the company said. well-informed sources.

Additionally, Redstone wanted to be indemnified from costly shareholder lawsuits and to give other shareholders the opportunity to provide feedback. But it was a sticking point for Skydance.

And other contenders emerged. In recent weeks, Redstone has received proposals to sell only National Amusements and its controlling shares of Paramount, which would represent a simpler transaction.

Former Seagram and Warner Music executive Edgar Bronfman Jr. and Hollywood producer Steven Paul (“Ghost in the Shell,” “Baby Geniuses”) have separately expressed interest in buying National Amusements. Both potential bidders indicated they would pay more than the amount National Amusements would have received under the Skydance bid.

The Redstones wanted to honor their late patriarch by not selling the family jewels cheaply. The Redstone family expects a better offer for NAI to materialize soon, sources said.

The sale of Paramount would have marked the end of an era for the Redstone family, which has long cherished its position in Hollywood. And it’s Shari Redstone who worked for years on the fringes of her father Sumner Redstone’s sprawling empire. The late tycoon and his top executives at his company, then known as Viacom, looked down on his talents and ambition.

But Shari Redstone held firm, and in 2016, as her father’s health deteriorated, she led a major housecleaning of the company.

Three years later, Redstone achieved its long-held goal of bringing Viacom and CBS together. The combined company was renamed Paramount Global in 2022, but its shares have since collapsed. Shareholders, including legendary investor Warren Buffett, have given up.

Bakish’s ouster was key to the unfolding drama, according to sources.

Redstone and Bakish had been feuding behind the scenes since November, according to informed sources. She had become increasingly impatient with Paramount’s sluggish stock performance and its credit downgrade to junk status. And she was furious about Paramount’s decision in May 2023 to cut its dividend to shareholders, according to three sources.

The dividend cut devastated the Redstones’ company, NAI, which then turned to Chicago banker Byron Trott and his BDT Capital Partners for a $125 million cash infusion last year to pay creditors who demanded money.

Bakish was fired on April 29. In an unusual arrangement, the board named three division heads: George Cheeks, the head of CBS; cable entertainment chief Chris McCarthy; and Brian Robbins, head of the Paramount and Nickelodeon film studio – as the “Office of the CEO”. The trio immediately got to work developing a business plan for Paramount that would satisfy Redstone and Wall Street.

After Paramount’s June 4 shareholder meeting, the three executives gave a private presentation that impressed Redstone and other board members, people familiar with the matter said.

The company finally seemed to have a path forward on its own.

The three executives also developed a kinship with Redstone, who was recently reinvigorated by the challenge of restoring Paramount to greatness.

The CEOs’ plan focuses on $500 million in cost cuts — including an undisclosed number of layoffs — and asset sales, which analysts say could include cable channel BET and television networks not affiliated with CBS. The group also announced it would explore a joint venture for the company’s Paramount+ streaming service.

Last fall, talks with Comcast about a streaming joint venture stalled because, at the time, Redstone was pursuing the deal with Skydance.

“In a nutshell, their balance sheet is unhealthy and they need a cash infusion to improve their balance sheet, which means they need to sell their assets,” said Laurent Yoon, a media analyst at Bernstein & Co.. “They have no other choice.”

Another obstacle to a deal with Skydance was the Redstone family’s fear that a regulatory review process could stretch over 18 months, causing more instability for the struggling media company. Getting a deal done was “already taking forever,” one insider said.

There were other factors as well. Paramount’s top independent executive, Charles Phillips Jr., had long opposed the two-phase, $8 billion deal with Skydance. The Santa Monica production company, its investors RedBird Capital Partners and private equity firm KKR, along with Larry Ellison, were investing billions of dollars in the deal.

Phillips, former chairman of Oracle Corp. by Larry Ellison, left this software giant in 2010 under difficult conditions. There has been speculation that Redstone is now considering Phillips for a bigger role.

“We continue to believe that Redstone/National Amusements is likely to appoint current Paramount board member and former Viacom board member Charles Phillips as CEO,” the industry analyst wrote Richard Greenfield in a note.

A person close to Redstone played down the speculation, saying the mogul had deep respect for Phillips as well as Cheeks, McCarthy and Robbins.

David Ellison, who made his reputation in Hollywood as a producer of successful films, had planned to install his own management group at Paramount, which would have left Robbins, the head of the film studio, particularly vulnerable , the sources said.

Executives at McCarthy’s cable programming division also felt threatened, recognizing that their future was uncertain because Skydance may have decided to sell its cable channels to pay down debt. “Now they live to fight another day,” another source said Wednesday.

The company may choose to ride out a few years of difficulty by scaling back to a purely niche content company, analysts say.

Paramount shares closed Wednesday down 8 cents at $11.12.

The scuttled sale does not solve National Amusements’ financial problems.

“We think National Amusements wants to sell Paramount eventually,” analyst Greenfield said. “We believe the next 12 to 18 months will be a ‘pause’ in Paramount’s (merger and acquisition) process, not the end.”

Times Staff Writer Samantha Masunaga contributed to this report.