(Bloomberg) — Paramount Global shares jumped the most in two months on Wednesday after a merger deal with independent film and TV producer Skydance Media was revived.
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Skydance, led by Oracle Corp. co-founder Larry Ellison’s son David Ellison, has reached a preliminary agreement to buy Shari Redstone’s National Amusements Inc. and merge with Paramount, the parent of CBS and MTV, according to a person with knowledge of the matter.
National Amusements, the family company that controls Paramount, will refer the deal to a special committee of Paramount directors for review, said the person, who asked not to be identified discussing an agreement that hasn’t been announced.
Shares of Paramount surged as much as 13% to $12.13 as trading opened in New York on Wednesday. They were up 8.9% at 10:39 a.m.
The accord followed the collapse last month of talks between Skydance and National Amusements. The two reengaged with each other in the last week, with discussions picking up steam Tuesday, the person said.
The new terms include a higher valuation for National Amusements and stronger language indemnifying the Redstones’ company against litigation that may result from the deal, the person said. The sellers have 45 days to seek better offers, another person familiar with the matter said.
Paramount and Skydance declined to comment. National Amusements didn’t respond to inquiries. The Wall Street Journal reported on the agreement earlier Tuesday, saying the terms of the deal weren’t known.
An agreement could be announced within days, the person said, though it’s still possible the deal could fall apart.
“The Paramount/Skydance deal has been discussed ad nauseam for ~7 months now and the fact that this is still the only serious deal on the table even today says a lot about Paramount’s strategic choices,” Kannan Venkateshwar, an analyst at Barclays Capital, wrote in a note to investors.
As part of the transaction that Ellison previously proposed, he and his partners, including RedBird Capital Partners and KKR & Co., offered to buy National Amusements for $2.25 billion and inject $1.5 billion into Paramount’s balance sheet to pay down debt. The film and TV company’s long-term borrowings exceed $14 billion.
The Ellison group would have contributed $4.5 billion in additional funds to purchase Paramount shares. Up to 50% of Paramount’s Class B non-voting shareholders were to receive $15 a share and all of the non-Redstone family Class A shareholders were to get $23 a share, people familiar with the discussions said at the time.
Bonds and credit insurance linked to Paramount also rallied in the wake of news of the preliminary agreement. The cost to insure Paramount against default dropped the most in eight months, while its 4.2% notes due 2032 tightened 45 basis points to 238 basis points over the benchmark.
The investments represented a significant potential lifeline for Paramount, which has struggled to compete as consumers abandon movie theaters and cable TV in favor of streaming.
The company had a net loss of $554 million, or 87 cents a share, in the first quarter.
Earlier Tuesday, Bloomberg News reported that Paramount is in exclusive talks to sell its Black Entertainment Television network to buyers that include BET Chief Executive Officer Scott Mills and Chinh Chu, who runs the New York-based private equity firm CC Capital.
The group has been discussing an offer of $1.6 billion to $1.7 billion, according to people familiar with the matter who asked not to be named revealing information that’s not public.
–With assistance from Hannah Miller, Thomas Buckley and Michael Tobin.
(Updates with bond trading in 12th paragraph.)
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