Merger talks between Skydance and Paramount were halted on Tuesday after Paramount's controlling shareholder called off the deal, bringing to an end a drama that had captivated Hollywood for months.
The halt in negotiations has derailed efforts to combine Paramount, the parent company of CBS, MTV and Nickelodeon, with Skydance, the up-and-coming film studio that is a key partner in Paramount's film business and produced “Top Gun: Maverick.”
The deal fell apart just as it neared completion: Just before Paramount's special committee was set to vote on the deal, National Amusements' lawyers emailed the committee saying they were terminating discussions. According to two people familiar with the matter, the email said National Amusements and Skydance had reached an agreement on financial terms but could not agree on outstanding “non-financial terms.”
Paramount's special committee confirmed its version of events in a statement, adding that it “did not vote on any potential transaction.”
Several sticking points arose last week as Skydance, Paramount and parent company National Amusements neared the final stages of negotiations. Paramount's controlling shareholder, Shari Redstone, had wanted Skydance to agree to give the deal some legal protection in case investors sued. Advisers worked through the weekend to reach a compromise on those terms and others that were still outstanding. As both sides made progress, a committee of Paramount's executives evaluating the plan fired the public relations firm it had been using.
The deal ultimately fell through after negotiations between Skydance and National Amusements collapsed. Mr. Redstone was upset that Skydance's revised terms reduced the value of National Amusements from $2 billion to $1.7 billion, an adjustment that would have affected his family's personal wealth, according to two people familiar with the matter.
One sign of tension on both sides of the deal is the length of the negotiations, which began late last year and continued until this week, and have been riddled with leaks – hardly a good sign for smooth negotiations.
“Sometimes games end with goal-line stands,” said Rich Greenfield, an analyst at LightShed Partners.
National Amusements said in a statement that it was unable to reach “mutually acceptable terms” with Skydance, a statement that included some joy that seemed out of place given the deal had fallen through.
“National Amusements thanks Skydance for their hard work over the many months in pursuing this potential transaction and looks forward to a continued successful production collaboration between Paramount and Skydance,” the statement said.
Skydance has not yet commented.
Paramount's future is uncertain. The company was considering a deal amid fierce headwinds in the traditional media industry, including the decline of linear TV, and those problems are likely to get worse. The company's stock price has plummeted in recent years as investors have become increasingly critical of the company's prospects.
As it was negotiating with Skydance, Paramount was developing a plan of action if a deal didn't come to fruition: The company's CEO office — the three executives who replaced Bob Bakish this spring — said at a shareholder meeting that it planned to explore a streaming joint venture and cut $500 million in costs.
Mr. Redstone has other options to pursue: National Amusements, the holding company that owns Paramount, has received expressions of interest from media investor Edgar Bronfman Jr. and Steven Paul, the Hollywood executive known for the “Baby Genius” series.
Paramount's attempt to sell itself over the past six months has been full of twists and turns worthy of a season of “Succession.” Since January, the company has come close to inking a deal with Skydance, received separate offers from Apollo Global Management and Sony Pictures Entertainment, replaced its chief executive officer and shrunk its board from 11 to seven. The company is still losing hundreds of millions of dollars annually from its streaming business, which includes its Paramount+ service.
Skydance is also at a crossroads: The collapse of the deal would likely damage the company's relationship with Paramount, which produces hit films such as “Mission: Impossible – Dead Reckoning Part 1.” David Ellison, the tech heir behind Skydance, personally lobbied Redstone for the deal and was a key figure in the talks.