A special committee of Paramount's board signed off on a merger agreement with Skydance on Sunday, according to two people familiar with the talks, ushering in a new era for CBS, Nickelodeon and the movie studio behind the “Top Gun” and “Mission: Impossible” franchises.
Shari Redstone, Paramount’s controlling shareholder, is expected to do the same by Sunday evening, and the two companies plan to announce the deal as early as Monday, the people said. Ms. Redstone could still change her mind, but this is the closest the two companies have come to announcing a deal after months of tense negotiations.
The deal would mark a turning point for the Redstone family, whose fortunes have been intertwined with the rise and fall of the traditional entertainment industry during its decades of ownership of Paramount and its predecessors. Ms. Redstone, Paramount's board chairwoman, would cash out most of her ownership in the company she fought to save and control.
The merger will create a new Hollywood behemoth. David Ellison, the tech magnate behind Skydance, will become the top power broker at Paramount. The deal is in some ways a media story, in which a family that made its fortune in traditional entertainment has been replaced by a tech-rich family – Mr. Ellison is the son of Oracle founder Larry Ellison. The substantial resources at Ellison's disposal have been a major selling point for Redstone, who has long wanted to strengthen Paramount.
In recent years, Paramount has become the poster child for a traditional media industry limping in the shadow of streaming giants Netflix and tech companies like Amazon, which have plenty of money to spend on their own media bets. Paramount has tried to replace its fading cable TV venture with streaming businesses like Paramount+, but those efforts still aren’t as profitable as traditional TV operations.
The deal is complicated. Skydance and its financial backers would acquire National Amusements, the company that holds the Redstone family's voting stock in Paramount, for about $1.75 billion. Paramount would also merge with Skydance, leaving the studio and its backers in charge of a media empire that includes film, TV and news properties.
The tender offer from Skydance would allow many holders of Paramount's nonvoting stock to be paid cash at about $15 per share. Investors who hold voting stock would be able to sell at $23 per share. This would allow investors who feel cheated by the Skydance deal — there are many — to sell the company's stock at a premium to its current price of $11.81.
The merger with Skydance would close a chapter for Ms. Redstone, 70, who took over from her father, Sumner, and fought to keep the family media empire intact.
Skydance's acquisition of Paramount has been a drama worthy of a summer blockbuster. Since the beginning of the year, Ms. Redstone, Paramount and Mr. Ellison have been engaged in semi-public negotiations that frequently leaked to the press and damaged goodwill on both sides.
Executives came close to striking a deal last month. But the renegotiated terms reduced the value of Ms. Redstone's controlling stake. Just as a special committee of Paramount's board was preparing to make it official, Ms. Redstone's lawyers emailed her to kill the deal, saying they could not agree to “non-economic terms.”
After the deal was shelved, other suitors emerged to woo Ms. Redstone, including billionaires Barry Diller and Steven Paul, best known for the “Baby Geniuses” movie franchise. But the Skydance deal returned last week, with Skydance improving its offer for Ms. Redstone’s stake and offering stronger protections against litigation.
Those provisions could help mitigate the challenge posed by investors who have opposed deals with Skydance, saying they would enrich Ms. Redstone at the expense of other shareholders. All of Skydance’s mergers considered have guaranteed her extra payments in exchange for her voting influence — commonly called a control premium — which some shareholders have called unfair. Some have threatened to sue.
The merger comes at a precarious time for Paramount. Its flagship streaming service, Paramount+, is losing hundreds of millions of dollars in cash each year. After clashing with Ms. Redstone, its chief executive, Bob Bakish, was replaced by three executives who run the “office of the CEO” — an awkward, temporary solution. And its cable business has long been in decline, causing its stock to fall more than 70 percent over the past five years.
Last month, Paramount's three chief executives proposed a plan they say will help get Paramount back on track, including cutting $500 million in costs and selling off parts of the company that aren't central to its strategy. Losses at Paramount+ have begun to mount, and the company is exploring potential joint ventures with other firms that could further reduce costs.
The man who will take control of the stifled company is a Hollywood producer who has helped finance some of Paramount's biggest franchises. dropping out After graduating from the University of Southern California to try his hand at acting, Mr. Ellison began financing films and founded Skydance in 2010. The company has made some of its most successful films with Paramount, including “Top Gun: Maverick” and “Mission: Impossible — Dead Reckoning Part One.”
Mr. Ellison, 41, plans to bring his own artists to Paramount. Jeff Shell, the former chief executive of NBCUniversal, is in discussions to take a prominent role, two people familiar with the matter said. He was fired from NBCUniversal last year after a CNBC anchor filed a sexual harassment complaint against him. Late last year, he joined Skydance backer RedBird Capital Partners as president of sports and media.
Mr. Bakish, 60, remains a consultant to Paramount. He will continue working at the company until October with a monthly salary of $258,333 and benefits, according to his exit agreement filed in May. His exit package also includes a two-year non-disparagement agreement.
Although Mr. Ellison has not spoken publicly about his plans for Paramount, he has briefed the board on his intentions, two people familiar with the matter said. Mr. Ellison has discussed the possibility of launching a joint streaming service with one or more of Paramount’s rivals. He also plans to improve the company’s technology, adding better personalization features to its streaming service.
Another pillar of Skydance's plans for Paramount is cost cutting. The company plans to consolidate some international operations, boosting profits partly by laying off employees. That won't win Mr. Ellison many fans among the company's rank-and-file, though it may help him please shareholders.