Skydance Deal In Hand, Paramount Lays Out What Happens If A Rival Offer Emerges

Jill Goldsmith

Thu, 11 Jul 2024, 10:40 am3-min read

Paramount has laid out some terms of its planned merger with David Ellison’s Skydance, including what happens if another bidder appears.

The deal includes a so-called “go shop” period during which other interest parties can submit offers. It runs for 45 days from the announcement of the deal, which was unveiled late Sunday night. The company said Thursday that the go-shop runs through 11:59 p.m. ET on August 21 and can be extended through September 5 if good-faith talks are underway for a better offer.

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“If the Company is engaged in the aforementioned activities with any third parties that contacted the Company and made an alternative acquisition proposal during the go-shop period that the Company Special Committee has determined in good faith is or would reasonably be expected to lead to a Superior Proposal … then the Company may, prior to the No-Shop Period Start Date, extend the go-shop period and the No-Shop Period Start Date until September 5, 2024, in order to continue to engage in such activities with such third parties upon written notice to Skydance,” according to an SEC filing posted today.

The deal calls for Skydance to acquire National Amusements, the Redstone family holding company that control Paramount, for $2.4 billion in cash. That puts the David Ellison company at the helm. Paramount will then absorb Skydance in an all-stock transaction valuing Skydance at $4.75 billion, merging the two companies.

NAI owns about 80% of Class A voting shares. To appease other public shareholders, Skydance and its backers including billionaire Oracle co-founder Larry Ellison and RedBird Capital have offered to acquired all other outstanding voting shares for $23 each, and a prorated chunk of the non-voting Class B shares for $15 apiece up to a cap of under $4.3 billion. The buyers will also invest $1.5 billion in Paramount.

If the other Class A holders, fund manager Mario Gabelli the largest, do not take the cash from Skydance, they will receive the equivalent of 1.5 Class B voting shares for each Class A share. In other words, only Skydance will hold Class A voting share from then on.

The filing, which includes the official transaction agreement, says Paramount is subject to certain restrictions in its ability to solicit alternative acquisition proposals from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative acquisition proposals. There are also some restrictions on business agreements but management still has some latitude on day-to-day operations. Details of that are confidential.

If Paramount decides to go in another direction, it will pay Skydance a termination fee of $400 million. It will also be on the hook for that payout if the transaction isn’t closed by April 7, 2025. subject to two automatic extensions of 90 days each if regulatory approval is not forthcoming, or if regulators outright nix the combination, which is not expected to happen.

Generally, no one expects another bidder to make an offer for Paramount. Barry Diller, head of IAC, has indicated interest. At Sun Valley yesterday, he told reporters that 45 days is a “lifetime”, according to Bloomberg. Paramount Global’s controlling shareholder Shari Redstone is also at the Idaho resort town for Allen & Co.’s annual conference.

It appears from the filing that only a full offer for all of Paramount, not just for Redstone’s holding through National Amusements as contemplated by some, would be considered a competing offer. Deadline will update when that’s clarified.

There was nothing in the agreement about Skydance assuming legal liability in the case of shareholder lawsuits, which may have been mitigated by the go shop clause.

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Skydance Deal In Hand, Paramount Lays Out What Happens If A Rival Offer Emerges