Inside the Controversial Bid to Buy the Studio Behind 'The Godfather' and 'Top Gun: Maverick'

About 30 years ago, the Paramount business was at the center of one of the most infamous takeover battles in corporate history, with bold-faced names like Barry Diller, John Malone, Sumner Redstone, and Wayne Huizenga (google him—he used to be a huge deal) battling each other for control of the legendary studio, with David Geffen, Michael Ovitz, and Ted Turner on the periphery.

Now in 2024, however, Sumner’s daughter, Shari Redstone, is looking for an exit from her controlling stake of the company and has found few interested buyers, despite the company’s stock price being at near-record lows (i.e., one could at least theoretically get it on the cheap).

One tricky thing about being Paramount these days is that its business is still heavily tied to linear TV, and over 50% of its revenues come directly from the melting cable TV bundle. It’s a problem that all traditional Hollywood studios are facing—and one that Netflix 100% is not.

Private equity investor Apollo Global Management has reportedly made an offer of about $26 billion for the entire company (which includes Paramount Global’s debt of over $14 billion). Still, the committee managing the sale process has chosen to focus on a rival bid from Skydance, a well-financed production company with additional gaming and feature animation divisions, led by David Ellison—yes, of the Oracle Ellisons—and had a valuation of over $4 billion in its last fundraise back in 2022.

Skydance and Paramount are actually already in business together, as the former has cofinanced films from the latter, including Top Gun: Maverick and last summer’s MI-7: Dead Reckoning. Skydance and Paramount are in the midst of a 30-day exclusive negotiating period, and if you think they’re trying to keep it clandestine, you probably also think the Kardashians make an effort to keep all of their family secrets behind closed doors.

The latest details involve quite a bit of financial minutia regarding voting stock, common stock, and potential share buybacks. (For those odd birds like myself who find this stuff fascinating, you can find the details in my recent Wakeup newsletter at The Ankler).

Why is the Skydance bid being favored over the Apollo bid? A big factor is likely that the Skydance offer centers on first buying out Shari Redstone, president of National Amusements Inc., which is the controlling shareholder of Paramount Global. The Skydance-led consortium is reportedly offering a large $2 billion payment to Redstone for her 77% of the voting shares, a premium price on the stock’s current value. Apollo’s bid was reportedly just for the Paramount Global company, essentially just buying out common stock holders, of which Redstone holds about a 10% stake.

Ellison’s reported partners in this Skydance bid are the private equity firms KKR and Redbird, with money from Ellison family patriarch Larry Ellison likely also in the mix. Suffice to say that they’re not doing this so they can finally fulfill their dreams of scheduling MTV. Rather, Ellison’s focus here, according to Bloomberg, seems primarily to gain control of the Paramount movie studio and TV divisions, which include a huge library from Cheers to The Godfather to Beverly Hills Cop, a nice merch biz from things like Nickelodeon and Paw Patrol, and the famous backstage lot on Melrose Avenue in Hollywood. In fact, it’s been reported that Ellison plans on investing further in the studio (alongside KKR and Redbird money, and possibly some money from Pa Ellison, Larry). So you would likely continue to see big films in movie theaters from Paramount if this deal comes to fruition.

The trickier part is what to do with those declining linear TV assets, including CBS, the free streaming service Pluto, and the money-losing Paramount+, which all come with the company. P+, as it’s called internally, lost over $1.6 billion in 2023. Yes, losses are expected to be less severe in 2024 and be profitable domestically in 2025, but its overall profitability has no stated timeline.

According to the Wall Street Journal, Ellison has indicated to Paramount management that he’d like to merge P+ with another streaming service, and Comcast’s Peacock would be a viable candidate, especially as Paramount+ with Showtime and Peacock programming are already combined in a joint venture together in Eastern Europe called Sky Showtime. (These two services combined lost about $4.3 billion last year, so the financial rationale here seems fuzzy at best.) But, if you’re a huge Paramount+ fan, there’s a decent chance that you’ll need to subscribe to this potential other combo service to watch many of your favorite Taylor Sheridan series and other P+ fare, should this Skydance deal happen.