Shari Redstone and the company’s special committee of the board of directors are more seriously considering a last-minute offer for Paramount Global.
The multibillion-dollar offer from a group led by Edgar Bronfman Jr. came before Paramount’s 45-day “go-shop” period to consider alternative acquisition proposals officially ended on Aug. 21. The deadline was extended, suggesting the offer is being taken seriously while Redstone considers whether to accept an offer from heir to the Seagram family’s liquor fortune, Bronfman, or heir to the Oracle software family fortune, David Ellison.
Paramount’s special committee established to evaluate acquisition proposals confirmed Wednesday that “receipt of an acquisition proposal from Edgar Bronfman, Jr. on behalf of a consortium of investors” could be sufficiently reviewed to extend the “go-shop” window to Sept. 5. The committee noted that during the window it “contacted more than 50 third parties to determine whether they would be interested in a takeover proposal for Paramount.”
The extension of a possible contract came after Bronfman increased his offer for a stake in Paramount and control of National Amusements from $4.3 billion to $6 billion, Wall Street Journal report. A representative for National Amusements declined to comment.
On July 7, Skydance and Paramount said they had agreed to a merger proposal that would see the Ellison family and Gerry Cardinale’s RedBird Capital Partners invest $2.4 billion to buy Redstone’s holding company, National Amusements. The offer would value a combined Skydance-Paramount at $28 billion if the deal goes through.
In addition, Paramount shareholders would receive $4.5 billion “for the merger stock/cash consideration to be paid for publicly traded Class A and Class B stock and $1.5 billion in common equity to be added to Paramount’s balance sheet,” the companies said. Santa Monica-based Skydance plans to hire former NBCUniversal chief Jeff Shell if the merger is completed.
When the special committee unanimously approved Paramount’s merger with Ellison’s Skydance Media on July 7, it laid out how the “go-shop” window would work. “There is no assurance that this process will result in a superior offer, and the company does not intend to disclose developments with respect to the go-shop process unless it determines that such disclosure is appropriate or otherwise required,” the board committee said in a statement. If Paramount decides to call off the merger with Ellison’s company, it would have to pay a $400 million severance payment.
Bronfman, the heir to the Seagram Co. liquor fortune, ran Universal Studios and Warner Music Group and served as a longtime board member of several companies, including Barry Diller’s IAC. He also founded the venture capital firm Waverley Capital.
While employees wait for the merger and acquisition dispute to be resolved, Paramount, led by its CEO trio of George Cheeks, Brian Robbins and Chris McCarthy, is in a holding pattern. The company has identified $500 million in cost savings and is cutting its U.S. workforce by 15 percent. Paramount stock has fallen about 23 percent since the beginning of the year.
The Wall Street analysts who normally cover Paramount are just beginning to offer theories on this turn of events. Ken Leon, an analyst at CFRA Research, maintained his hold rating and $12 price target on Paramount after the first news of Bronfman’s takeover offer surfaced (the company closed at $11.09 on Wednesday).
“We believe there are greater fundamental synergies with Skydance, and the final word comes from Shari Redstone, Paramount’s non-executive chairman and majority shareholder,” he wrote. “We believe the greatest assets for Paramount are in film production. Skydance remains a key partner to Paramount in blockbuster film franchises such as Mission: Impossible, Top Shooter: Maverick, Transformers and other films.”
However, early Wednesday, analysts Richard Greenfield, Brandon Ross and Mark Kelley of LightShed Partners expressed a different opinion, pointing out that at least one backer of the Bronfman offer had a connection to Redstone.
“If the Redstone family doesn’t want Bronfman to make an offer, why would Bronfman waste all this time and effort, not to mention finding nearly 20 outside investors to help him acquire Paramount?” the analysts asked. “Perhaps the Redstones have reconsidered whether to sell to Skydance/Ellison? Remember, just before the Skydance deal closed, the entire transaction seemed to have fallen through.”
The team concluded: “Or maybe this is all an elaborate ploy to drive up the price for Skydance/Ellison and force them to increase their bid. Or maybe it’s simply a way to reduce the legal risk of shareholder litigation related to accepting Skydance/Ellison’s offer. We honestly don’t know.”
