We were this close to being done with Paramount M&A drama. Not so fast.
Just ahead of the deadline for Paramount‘s 45-day “go-shop period,” in which the company could entertain offers from anyone not named David Ellison, Edgar Bronfman Jr. formally submitted his own bid for Paramount Global, the Wall Street Journal reported. At a glance, Bronfman’s bid is very similar to what the Skydance CEO offered Shari Redstone, who in turn accepted. There is one major difference however, and it could make the Seagram’s heir a real champion of the common man — or at least the common stockholder. (And no, it’s not the gin or the whiskey.)
Paramount’s special committee is tasked with determining if Bronfman’s offer “is or would reasonably be expected to lead to a superior proposal” than its bird in the hand. The committee can now extend the shopping window by 15 days, and Ellison still has the chance to match or beat any bid in the bush.
Well, the match thing pretty much already happened in reverse. Bronfman’s bid of $4.3 billion to achieve control of Paramount is quite close to the check Ellison endorsed to Redstone. Bronfman would pay $2.4 billion for Redstone’s National Amusements, which controls Paramount, as well as $1.5 billion to relax Paramount’s debt load; he would also cover the $400 million breakup fee that Skydance is owed if its accepted deal gets kiboshed.
But Bronfman would not interject additional capital into Paramount itself — Skydance will.
An easy “pass,” right? Wrong. For starters, Bronfman doesn’t have any (public) plans to force Paramount to buy — or merge with — another media company, including Fubo, whereas Ellison endeavors to beef up Skydance with Paramount’s IP.
Plus, Bronfman’s bid could just be a starting point: the WSJ says Bronfman has already raised $5.5 billion (his bid combines 19 partners, including “Baby Geniuses” producer Steven Paul, former Turner CEO John Martin, and Brock Pierce, a child star in “The Mighty Ducks” turned crypto investor) and would be prepared to up his offer if the committee gives him the green light. In a letter to the chair of Paramount’s special committee obtained by the publication, Bronfman says his offer is “far more valuable” than that other one because it, in part, “eliminates the risks, uncertainties, and costs of combining Paramount with Skydance.”
The Skydance deal, even in its current state, still disproportionately benefits Redstone far more than the common Paramount Global (PARA) shareholder. And as Bronfman points out, when Ellison makes Paramount buy Skydance in an all-stock transaction, the current 667 million outstanding shares of Paramount Global will be diluted. That got their attention. As will this: all of those Class B shareholders who do not currently have a vote on company matters will under a Bronfman regime. (Skydance’s offer on the other hand lets shareholders cash out or roll into the new company as non-voting shareholders.)
Last week, in anticipation of a Bronfman offer, Lightshed analyst Rich Greenfield said NAI may not even “entertain” one. A “cynic,” he wrote in a blog post shared with IndieWire, would presume Redstone is just using Bronfman’s deal to avoid a shareholder lawsuit, hoping to point to an inferior deal as proof that Redstone accepted the best deal they could. That could be trickier now. Plus, who is outspending the Ellison family? (Dad Larry Ellison is the co-founder of Oracle, which has a market cap of $383 billion)
Though a Bronfman deal may be better for shareholders, it would likely be much worse for creatives — and Paramount staffers. Bronfman would likely sell off assets, Greenfield wrote, and could scrap streaming entirely in favor of licensing Paramount’s studio content out to others. Bronfman’s proposal also says he’s identified $3 billion in cost savings, whereas Skydance sees $2 billion worth. That probably means even more layoffs with Bronfman calling the shots.
