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In short:
Paramount Global and Skydance Media have agreed to a multi-billion-dollar merger in the hopes of "energising" Paramount's offerings.
Two people familiar with the merger told Reuters that Paramount's Shari Redstone and Skydance's David Ellison negotiated for some time before finalising the deal.
What's next?
Paramount has 45 days to find a better offer, leaving open the possibility of another business plot twist.
Skydance Media and Paramount Global have agreed to merge, the companies announced late on Sunday, scripting a new chapter for one of Hollywood's oldest studios.
The companies have agreed to a two-step process in which Skydance and its deal partners will acquire National Amusements, which holds the Redstone family's controlling stake in Paramount, for $US2.4 billion ($3.56 billion) in cash.
Skydance will then merge with Paramount, offering $US4.5 billion in cash or stock to shareholders and providing an additional $US1.5 billion for Paramount's balance sheet.
The deal represents the end of an era for Shari Redstone, whose father and late patriarch Sumner Redstone transformed the family's chain of drive-in movie theatres into a media empire.
The family's fortune included Paramount Pictures, the CBS broadcast network and cable television networks Comedy Central, Nickelodeon and MTV.
"Given the changes in the industry, we want to fortify Paramount for the future, while ensuring that content remains king," Ms Redstone, chair of Paramount and National Amusements, said, using a phrase her father coined.
The merger will combine Paramount — home of such classic films as Chinatown, The Godfather and Breakfast at Tiffany's — with its financial partner on several major recent films, including Top Gun: Maverick, Mission: Impossible — Dead Reckoning and Star Trek Into Darkness.
David Ellison, the 41-year-old tech scion who founded Skydance, will become chairman and chief executive of the new Paramount.
Jeff Shell, former chief executive of NBCUniversal, will be its new president.
Tensions at Paramount
Mr Ellison, son of Oracle co-founder Larry Ellison, stands to inherit a media company that has a mountain of challenges as it navigates an entertainment business up-ended by the streaming video revolution.
Paramount has shed nearly $US17 billion in value since late 2019, as its traditional television business has eroded faster than its Paramount+ streaming service could turn a profit.
There has been tension in the executive suites.
Paramount chief executive Bob Bakish was ousted in April after clashing with Ms Redstone over the Skydance deal.
He was replaced by a trio of executives who occupy the "office of the CEO".
This group has proposed making $US500 million in cuts, selling off certain assets and exploring a possible joint venture partner for Paramount+.
Mr Ellison pledged to bring "best-in-class" technology and modern infrastructure to Paramount+ and the free streaming service, Pluto TV, even as it enhanced Paramount's traditional television networks.
"We are committed to energising the business and bolstering Paramount with contemporary technology, new leadership and a creative discipline that aims to enrich generations to come," Skydance said in a prepared statement announcing the deal.
The Paramount-Skydance deal came together after months of talks that appeared to have derailed when Ms Redstone abruptly called off negotiations on June 11.
At that time, Skydance and its partners had reached an agreement to acquire National Amusements, which owns 77 per cent of the voting shares of Paramount.
However, talks reached an impasse over other issues, including National Amusements' request that the deal be approved by a majority of non-Redstone shareholders, a condition Skydance considered a non-starter.
Other prospective bidders for National Amusements emerged.
Independent Hollywood producer Steven Paul, Seagram heir Edgar Bronfman — who is backed by private equity firm Bain Capital — and IAC Chair Barry Diller made a play for the company.
Sony Pictures and buyout firm Apollo Global Management had expressed interest even earlier, though a deal never materialised.
Meanwhile, discussions between Mr Ellison and Ms Redstone quietly resumed. They became more constructive, two people familiar with the deal told Reuters.
The new deal
Skydance sweetened the Redstone family's payout for the sale of National Amusements to $US1.75 billion, said one of the sources familiar with deal terms.
It also reportedly enhanced legal protections from possible shareholder lawsuits, clearing the way for a new agreement.
Under the terms of the agreement, Mr Ellison's Skydance will merge with Paramount in an all-stock transaction that values Skydance at $US4.75 billion.
The merger will create a company with an enterprise value of $US28 billion.
The Ellison Family and Redbird Capital Partners will pay $US15 a share in cash or stock to Paramount's non-voting Class B shareholders, representing a 48 per cent premium as of July 1.
Holders of the Class A voting stock would receive $US23 a share in cash or stock, or a 28 per cent premium as of July 1.
Once the transaction closes, Skydance's investor group will own 100 per cent of the new Paramount's Class A voting shares and 69 per cent of its outstanding B shares.
The deal also gives Paramount 45 days to find a better offer, leaving open the possibility of yet another plot twist in an already chaotic deal process.
Reuters