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Paramount shareholders will not like how this movie has ended. Still, there might be some relief the show is finally over.
On Sunday night, the US media titan finally concluded its merger saga, announcing a combination with Skydance Media. The denouement is predictably a mess.
Ordinary shareholders get $15 in cash for 48 per cent of their holdings along with a stake in the new Paramount for the remainder, or $4.3bn in total. The small sliver of voting shares owned by the public get $23 per share. The investment vehicle of the fabled Redstone family, which owns just a tenth of the overall Paramount economics but a three-quarters voting interest, gets the sweetest deal: roughly $38 per share or $2.4bn all together. (The Redstones’ small cinema chain will be acquired too and their net proceeds are $28 per share).
The deal will not require ordinary shareholders to approve this Redstone power play, with the family simply exercising their control rights to seal the deal. A possible sequel to this sorry show then may be an investor lawsuit: a key contract provision seemingly demands that Skydance underwrite some portion of future potential Redstone liability.
In the meantime, all eyes should be on the Skydance business. Skydance, an ambitious movie producer backed by KKR and RedBird Capital, is reverse-merging into Paramount at a $4.75bn valuation. Skydance is separately buying $1.5bn of fresh Paramount equity.
In total, between its film business, acquisition of the various existing shares of Paramount and its cash infusion, it will own 70 per cent of the new Paramount economics. The mooted enterprise value of the new Paramount is $28bn. How that paper valuation stacks up will become clearer as the company’s shares start trading on Monday.
The Redstone family over more than three decades made Paramount a powerhouse in global media. But they failed to keep pace with the streaming and digital revolution of the past decade. Through the quirks of their dual-class share structure, the brunt of that disappointment falls on the public shareholders who could not secure the lopsided payout that the family negotiated. Any litigation settlement is unlikely to bridge much of the chasm.
Skydance — whose chief executive is the son of software mogul Larry Ellison — will now have total voting control of Paramount. At least, after putting in $8.5bn of cash, Skydance’s dominant economic interest may leave it better aligned with public shareholders than the Redstone family’s arrangement. Perhaps it will be more motivated to pursue a happy ending.
sujeet.indap@ft.com
