Deal or no deal for Paramount? Here are the options on the table

The double-arch entryway to Paramount Pictures with palm trees visible in the background

The Melrose Gate of Paramount Pictures in Hollywood. (Al Seib / Los Angeles Times)

Time is running out for Paramount Global and Skydance Media to reach a deal combining their entertainment empires within the 30-day exclusive negotiating window that closes Friday, and it appears likely that the week will pass without an agreement on a transaction.

Paramount, controlled by Shari Redstone , and Skydance, helmed by film producer David Ellison, have been trying to hammer out a complicated deal that would leave Ellison in control of the storied media giant. And so far, no agreement has been struck.

What has long looked like Paramount Global’s most viable buyout option has been the subject of weeks of palace intrigue, plagued by an investor rebellion and corporate shakeups. Paramount’s stock fell roughly 7% on Friday amid a report that the company was getting cold feet about Skydance’s offer.

Read more: Sony and Apollo make formal $26-billion joint bid for Paramount

New York-based research firm LightShed Partners said Friday that it expects the bargaining deadline to arrive sans agreement, with another bid from Sony Pictures Entertainment and Apollo Global Management on deck.

The Times has contacted Paramount Global for comment. A spokesperson for Paramount’s mergers and acquisitions committee declined to comment.

The Skydance scenario

Since reports surfaced in January that Ellison’s Skydance was exploring an all-cash deal to acquire National Amusements Inc. — the company that holds 77% of Paramount Global’s voting stock — things have gotten messy.

Over the past month, Paramount has been negotiating with Skydance, which has linked up with investment firms RedBird Capital and KKR to take over National Amusements, which would give it control of Paramount, owner of the Paramount Pictures movie studio on Melrose Avenue, broadcast network CBS and cable channels MTV and Nickelodeon.

The talks spurred a revolt led by Paramount Global investors who expressed concerns that the deal on the table would largely benefit Paramount’s nonexecutive chairwoman, Redstone, at the expense of regular shareholders.

Read more: David Ellison’s Skydance explores possible merger with Paramount through National Amusements

The investor uprising caused Paramount shares to plummet and prompted several of the company’s directors to step down. In an effort to quell the backlash, Skydance recently upped its offer with a cash infusion for Paramount and by setting aside funds specifically for Paramount’s nonvoting shareholders, which would probably reduce Redstone’s take.

All of this corporate turmoil culminated Monday in the termination of Paramount Global Chief Executive Bob Bakish, whose opposition to the Skydance deal did not sit well with Redstone.

Bakish preferred another Paramount Global suitor, private equity firm Apollo Global Management, which joined forces this week with Sony Pictures Entertainment to submit a $26-billion all-cash bid for the entertainment empire.

Sony-Apollo hover around the hoop

While this Paramount-Skydance saga has been unfolding, Apollo and Sony have officially entered the ring as a team.

Culver City-based Sony has offered to become a majority shareholder in the entertainment company, with Apollo as a minority owner.

Read more: Sony in talks to team with Apollo to bid for Paramount

Because Sony Corp. is based in Tokyo, Apollo would probably have to assume control of Paramount’s CBS network in order to abide by Federal Communications Commission rules that restrict foreign ownership of broadcast TV stations — a technicality that could make the offer less attractive to a company reluctant to divvy up its assets, according to analysts at LightShed.

Such a deal, while cleaner from a financial perspective, would cause upheaval in Hollywood. It would probably result in mass layoffs, reducing the number of major movie studios from five to four.

What if none of the above?

After Bakish was ousted, Paramount Global appointed three of its top entertainment executives — Paramount Pictures CEO Brian Robbins, CBS CEO George Cheeks and Showtime/MTV Entertainment Studios head Chris McCarthy — to lead the company in an “office of the CEO” capacity.

If a Paramount-Skydance merger fails to pass, analysts at LightShed Partners predict Paramount will move forward with its leadership trifecta, focus on restructuring its business and eventually revisit mergers and acquisitions discourse later this year or in 2025. The regulatory landscape is expected to become clearer after the 2024 presidential election.

The LightShed analysts doubt that Paramount will immediately pivot to a Sony-Apollo deal in the event that talks with Skydance fall apart.

Read more: Bob Bakish is ousted as CEO of Paramount Global as internal struggles explode into public view

“We’re only four days in so there’s not a lot I can say,” Cheeks wrote in a memo to Paramount Global staff. “But … Brian, Chris and I are in the process of finalizing our strategic plan that we’re going to roll out as soon as possible.”

Times staff writers Samantha Masunaga and Meg James contributed to this report.

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This story originally appeared in Los Angeles Times.

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