Redstone’s new Paramount and Skydance merger offer

One feature to start: With the mining and London market abuzz with speculation about the BHP-Anglo American takeover saga, the FT’s Tom Wilson dissects the other possible bidders for the miner with a market capitalisation of £36bn.

In today’s newsletter:

• Shari Redstone preps Paramount-Skydance merger

• Exor wins big on litigation in the US

• Private equity’s boycott challenge in Asia

Shari Redstone prepares a new Paramount-Skydance merger bid

It’s no secret that Paramount’s controlling shareholder Shari Redstone is hell bent on merging the media conglomerate with Skydance, the studio built by David Ellison, son of Oracle founder and US billionaire Larry Ellison.

Now, amid rising anger on Wall Street over a merger that has yet to even be announced, Redstone’s preferred bidder unveiled a new structure to Paramount’s board of directors.

Redstone and Skydance have prepared an offer that involves billions in cash going back to minority shareholders at a premium price, the FT reports. In addition, Redstone will roll a significant part of her holdings into the combined company to show alignment with shareholders.

This sweetened offer comes after Redstone faced growing criticism for trying to cash out her stake in Paramount through the family holding company National Amusements, while leaving public stockholders to in effect buy Skydance.

The new offer comes as Paramount chief executive Bob Bakish resigned on Monday, throwing the Hollywood group behind The Godfather into further turmoil.

It also comes amid pressure from a competing takeover effort being prepared by Apollo Global. Last month, Paramount rejected a $26bn all-cash offer by the private equity group. Now, Apollo is preparing a bid alongside Sony Entertainment that could be unveiled as early as this week.

Under the latest terms of the offer, Skydance would buy Redstone’s National Amusements for less than $2bn — not as much a previously discussed. Paramount would then merge with Skydance, valuing Ellison’s company at about $5bn in an all-stock deal. The combination would value the existing common shares of Paramount at about 30 per cent above its current trading share price.

The Ellison-led consortium would also invest a further $3bn in the combined company. Two-thirds of the proceeds would pay cash to common shareholders and the remainder used to reduce Paramount’s debt.

Redstone has prioritised the merger with Skydance because she believes Ellison can revive the fortunes of Paramount. While many big names in Hollywood are supportive of the merger, investors are bubbling with rage.

DD will be watching to see if Redstone can finesse a deal without winding up in a familiar position — fending off a litany of shareholder lawsuits.

Elkann’s Exor scores big win on Philips

John Elkann, scion of Italy’s Agnelli family dynasty, made an unusual €2.6bn bet last August on a troubled Dutch maker of electric toothbrushes and hospital monitoring machines.

That gamble paid off spectacularly on Monday. Shares in Philips jumped 37 per cent after the Dutch company agreed to pay $1.1bn to settle personal injury claims linked to faulty foam in its sleep apnoea devices.

The 15 per cent stake owned by the Agnellis’ holding company Exor was a way for the company to broaden its investments beyond its major holdings, which include car companies such as Ferrari and Stellantis. The position now looks to be worth about €3.6bn.

Back in August, Exor’s punt looked like a risky move. Costs from healthcare litigation can spiral as any investors in Bayer can vouch for. And Philips’ market cap had fallen by almost €29bn since April 2021 when it began recalling millions of its sleep apnoea devices.

As litigation has dragged on, it has laid off thousands of workers and lost a chief executive.

Exor and other investors who kept faith have been rewarded with news of a payout to settle claims, which is far lower than expected and has come sooner than some analysts expected.

The only regret for Exor will be that it didn’t buy more of the stock. When its investment was announced in August, it had the option to increase its stake to 20 per cent. At the end of March, that share was still stuck at 15 per cent. The good news is that Lex believes there’s more room for Philips shares to rise further.

Private equity halts stake sales amid war in Gaza

It is not just students at America’s top universities protesting Israel’s war in Gaza. Tens of thousands of Indonesian and Malaysian citizens are doing the same — but in south-east Asia it is global private equity, not university presidents, feeling the heat.

From Jakarta to Kuala Lumpur, consumers in the Muslim-majority countries have shunned US brands since the start of Israel’s assault in Gaza in response to Hamas’s attack on October 7, write the FT’s Mercedes Ruehl and A. Anantha Lakshmi. Starbucks, Pizza Hut, KFC and American beauty brands are being targeted over Washington’s support for Israel.

The boycotts, largely fuelled by social media, have been so effective that private equity heavyweights General Atlantic and CVC Capital Partners have had to call off multimillion-dollar stake sales in the businesses that operate the brands.

General Atlantic paused the sale of its 20 per cent stake in Indonesian Starbucks operator Map Boga Adiperkasa in December. CVC has also halted the sale of its 21 per cent stake in Malaysia’s QSR Brands, the country operator of KFC and Pizza Hut.

“It was impossible to sell a stake as a growth opportunity when sales are down, expansion plans are being scaled back, employees are being harmed in stores and there is no sign of the boycott ending,” said one person familiar with General Atlantic’s thinking.

Another person familiar with the decision at CVC said the irony was that the companies are mainly owned by domestic investors, and overwhelmingly employ local employees. “We are trying our best to explain the brands’ neutrality but it is not working,” they said.

Like the Middle East, consumer boycotts of western brands in Malaysia and Indonesia have previously lasted years. As one analyst put it: General Atlantic and CVC “best settle in and [hunker] down”.

Job moves

• Christian Meissner, the former head of Credit Suisse’s investment bank, has left BDT & MSD after less than a year on the job, according to sources familiar with the matter. He joined the merchant bank last May to expand its European operations.

• Delivery Hero, the German food delivery company, has proposed expanding its supervisory board and nominating Scott Ferguson, managing partner at Sachem Head, to its board as part of a co-operation agreement with the activist investor.

• Former Barclays boss Bob Diamond will be appointed chair of social media start-up Triller after financial services platform AGBA, of which he has been chair since September, agreed an all-share takeover of the company looking to take on TikTok.

• Kirkland & Ellis has hired James Donohue, Mirela Hristova, Michelle Kim and Joseph Baron as partners in its investment funds group. The team, led by Donohue, joins from Goodwin.

Smart reads

Air miles There’s already a stark gulf between reported executive compensation and the pay-off executives receive. The hundreds of thousands of dollars they receive in unreported flight benefits each year only widens it, The Wall Street Journal reports.

Culture shock Before being taken over by Deutsche Bank, London-based dealmakers at British investment bank Numis could climb the stairs to speak with their research colleagues at will. Under new ownership that’s no longer the case, Bloomberg reports.

Gone Public CVC’s Amsterdam IPO seems to have kept everyone happy, with the stock surging in its opening days. Here’s what Europe’s biggest private equity groups did so right, writes Craig Coben at Alphaville.

News round-up

BHP’s bid for Anglo American chips away further at London’s reputation (FT)

L’Occitane owner offers to take skincare group private at €6.5bn valuation (FT)  

Puig aims for top-of-the-range €14bn valuation at IPO (FT)  

Deutsche Bank shares slide on €1.3bn Postbank hit (FT)   

Blackstone strikes $1.6bn deal for Hipgnosis as bidding war escalates (FT) 

Silicon Valley’s General Catalyst closes in on $6bn fund for tech start-ups (FT)  

Western banks in Russia paid €800mn in taxes to Kremlin last year (FT)   

French government seeks to buy assets from Atos (FT)