By Jessica Toonkel
Paramount Global boss Shari Redstone took a winding path to sell her family's media empire. Along the way, a CEO was dethroned, multiple board members resigned and investors lashed out.
Now, the 70-year-old media heiress is preparing to hand the reins to a new owner in 2025 -- but she promises not to go away entirely, and neither will Paramount's problems.
Redstone earlier this year struck an $8 billion deal with Hollywood production company Skydance Media that will reshape the entertainment landscape. She is selling National Amusements, the family company that owns movie theaters and through which she controls Paramount.
As part of the transaction, Skydance will merge with Paramount, gaining control of a collection of assets that include the iconic studio behind "The Godfather" and "Titanic," CBS and cable networks like MTV.
Skydance Chief Executive Officer David Ellison will face a formidable task: Paramount shares are down about 26% this year as a growing Paramount+ streaming business hasn't been enough to offset the accelerating decline of the company's cable business, which took a $6 billion write-down in August. The landscape is shifting as more people abandon traditional TV; Comcast is spinning off nearly all its cable channels in 2025.
Ellison and his top lieutenant, former NBCUniversal CEO Jeff Shell, have explored how to catapult Paramount's position in streaming. They are looking at integrating the company's free, ad-supported Pluto service into Paramount+, people familiar with the situation said.
Paramount's current management had explored streaming partnerships with a number of companies including Amazon, YouTube, Warner Bros. Discovery and Netflix, though nothing has come to fruition. One main sticking point with Warner has been which company would have control of any joint venture, according to people involved in the discussions. Ellison and Shell are seeking over $2 billion in cost cuts.
Redstone, daughter of the late media titan Sumner Redstone, was a reluctant seller, and shortly after the deal was signed, she was already tearfully telling associates that she had regrets about relinquishing her family's business. She managed to secure some trappings of mogul life. Skydance and its investors agreed to take on National Amusements' financial obligations and pay for the remainder of Redstone's lease for her private jet, and will cover the expenses for her Central Park-area apartment in New York City for the next few years, according to people familiar with the situation.
Redstone's relationship with Donald Trump may also come in handy as the next administration evaluates the Paramount-Skydance deal. The president-elect's incoming nominee for Federal Communications Commission chairman, Brendan Carr, has said the agency could scrutinize whether CBS's handling of a "60 Minutes" interview with Kamala Harris -- which critics said was edited in misleading ways -- violated standards that require broadcasters to act in the public interest. Trump filed a $10 billion lawsuit against CBS, which has denied wrongdoing.
Redstone has told people close to her that she understands Trump's frustration with CBS, even though she doesn't support the lawsuit. She has gotten along well with Trump for years. He was supportive in the court battles that helped her gain control of Paramount several years ago, people familiar with the matter said, and the two still talk on occasion.
Larry Ellison, the billionaire co-founder of Oracle and father of David Ellison, also has a longstanding relationship with Trump.
Dance partners
The final deal came after a will-they, won't-they corporate drama for the ages. The negotiations, in which Skydance was code-named "Sparrow" and Paramount "Pluto," stopped and restarted multiple times.
Exclusive talks with Skydance, whose credits include TV shows such as Amazon's "Tom Clancy's Jack Ryan" and movies like "Top Gun: Maverick," started on April 3. Some Paramount investors balked at initial proposals that they said gave Redstone a sweeter deal than ordinary shareholders.
Meanwhile, Redstone and the Paramount board were losing faith in CEO Bob Bakish, who had voiced concerns about the Skydance deal and sought out alternatives. Some directors felt the long-range plans Bakish had presented to the board recently didn't include enough cost-cutting and had overly optimistic growth projections, according to people familiar with the situation.
Certain board members approached George Cheeks, then the head of CBS, and two other top executives, studio chief Brian Robbins and cable networks chief Chris McCarthy, to get a sense of what the executives would do if they were running the company.
Later in April, Cheeks was getting off a plane in Las Vegas to see comedian Cedric the Entertainer perform when Redstone called to say Bakish was out. Meanwhile, merger talks with Skydance Media were stalling.
The Wall Street Journal first reported on Bakish's fate on April 26. The company announced his exit days later, and named Cheeks, Robbins and McCarthy as co-CEOs.
'The three amigos'
At that point, it seemed as if Redstone intended for Paramount to go it alone. Cheeks, Robbins and McCarthy's initial plans called for the possibility of a streaming joint venture, cost cuts and a potential sale of Pluto, people close to the company said.
In the early going, staffers found the new arrangement inefficient and were confused about how to address the new leadership team, with the nickname "the three amigos" catching on. Officially, the trio was given the moniker of "Office of the CEO," which was then changed to "Office of the co-CEOs."
Skydance remained interested in Paramount, but it had competition. Apollo Global had sent a letter to Paramount expressing interest in buying the company for $26 billion. That offer looked compelling to many investors, compared with the math for Skydance, whose financials were revealed in a Journal report.
Eventually, Skydance sweetened its original offer. Under the new proposed terms, all nonvoting and voting shareholders would have an option to cash out at a premium. The talks accelerated, and the deal seemed to be nearing completion.
As the Paramount special board committee gathered on June 11 to consider the deal, Redstone was signaling to one board member that something was wrong, people familiar with the matter said. Minutes before the call, the special committee's lawyer, Faiza Saeed, a partner with Cravath, Swaine & Moore, received an email from Redstone's deal lawyer explaining that the parties had failed to find common ground on fundamental issues.
"As such we do not have an agreement on a deal with Skydance nor do we anticipate that we will find a path forward for this transaction," the email said.
Redstone was still concerned about the legal risks from the deal as well as the financial haul for her family's company, which she concluded was being watered down.
Almost immediately after the deal collapsed, Ellison wrote to Redstone and her son Tyler Korff, who had been working on the deal, acknowledging there were missteps on his side, according to people familiar with the exchange. The two sides quietly got back into negotiations, while the rest of the business world -- including the Paramount board -- thought the deal was dead.
Saeed, the attorney for Paramount's special committee, received yet another unexpected email from Redstone's side on July 2, this time to say that Redstone's National Amusements had reached a deal with Skydance and it was now up to the board to finalize a merger of Paramount and Skydance.
'I will never disappear'
To help pacify Paramount's nonvoting investors, Skydance agreed to provide $4.5 billion that Paramount can use for an offer to buy out about 50% of nonvoting shares. Redstone got $1.75 billion for National Amusements.
Skydance's Shell and Ellison are building out Paramount's management team as they prepare to take control of the company. Former Netflix executive Cindy Holland is expected to oversee streaming, reporting to Ellison. Cheeks is expected to be head of TV, according to people familiar with the situation. Dana Goldberg, chief creative officer at Skydance, is expected to oversee the combined studio, and Robbins, one of the co-CEOs, is expected to depart. Bloomberg earlier reported some of the expected management changes.
Under the deal's terms, Redstone and Korff could join the board of the combined company, but both have decided against it, according to people familiar with the situation.
Despite that, Redstone made it clear that even though she was selling the company, she wasn't planning to go away completely.
"One thing I promised everybody in the company is I will never disappear in terms of being your advocate and in terms of helping you be who you need to be, who you want to be in this company," Redstone said at Advertising Week New York in October, when addressing a controversy at CBS News.
--Lauren Thomas contributed to this article.
Write to Jessica Toonkel at jessica.toonkel@wsj.com
(END) Dow Jones Newswires
December 22, 2024 09:00 ET (14:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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