The full contract terms for Skydance Media’s takeover of Paramount Global were disclosed Thursday. And, as expected, there are various restrictions on what Paramount and Skydance can do without the other party’s consent in the pre-closing period.
Under the terms of the agreement, Paramount Globalhas the right to shop around for a better offer in a 45-day window. And, as previously announced, Paramount would have to pay a $400 million breakup fee to the Skydance investor group.
Also detailed in the 273-page transaction agreement, disclosed in an 8-K filing, are certain restrictions concerning Paramount+.
Conversational AI Is A Novel Opportunity for Hollywood — but Do Talent or Consumers Want It?
Producer David Ozer Pleads Guilty to Defrauding 'Safehaven' Investor
Unless it gets the written consent of Skydance, Paramount is not allowed to enter any joint venture or “omnibus content licensing and/or subscriber acquisition/migration” arrangement involving Paramount+. Per the contract terms, Paramount “shall also consult with Skydance in good faith with respect to any material developments” relating to the negotiations involving a JV arrangement for Paramount+.
In addition, Paramount may not enter into any new contract with respect to the bundling of Paramount+ with “any of the top seven third-party streaming services (by number of U.S. subscribers)” or do such a deal “outside the ordinary course of business.” Paramount also must get approval to do a deal that would extend the term of an existing streaming distribution contract by more than one year.
One potential streaming partner for Paramount is Warner Bros. Discovery, which is open toexploring a combination of Max and Paramount+.
“We’ve had a bunch of inbound [inquiries] from a number of people about partnerships that could involve a partnership with another player or players. And so we will evaluate all that,” according to Jeff Shell, the RedBird exec and ex-NBCUniversal CEO who is set to become president of Paramount when the deal closes. Shell, speaking on Monday’s presentation for investors, also noted that Paramount’s current management team has “come up with a plan potentially on the international business, which is likely to be executed between now and closing, which we also think will be quite compelling to the cash flow generation of the DTC segment.”
Chris McCarthy, president and CEO, Showtime/MTV Entertainment Studios and Paramount Media Networks, at a June 25 town hallmeeting for employees said that on the international front, “we are advancing talks with potential partners that will significantly transform the scale and economics of the [streaming] service making it profitable and driving long-term value. This approach could also serve as a model for the U.S.”
Meanwhile, there are other restrictions spelled out in the agreement. For example, as is customary, neither Skydance nor Paramount is allowed to greenlight “the production, acquisition or financing of any Property” or commit “to produce, acquire or finance any Property” without the other company’s OK. A source close to the situation said that the terms allow Paramount’s existing leaders to make the vast majority of creative decisions on TV and film projects without Skydance’s blessing but there are guardrails in place for larger transactions. Details about which projects are subject to the greenlight-approval provision remain confidential.
Under agreement with Skydance and financial backer RedBird Capital Partners, the special committee of Paramount’s board of directors has a 45-day go-shop period during which it will be permitted to “actively solicit and evaluate alternative acquisition proposals.” According to Paramount, it “does not intend to disclose developments with respect to the go-shop process unless and until it determines such disclosure is appropriate or is otherwise required.”
The go-shop window expires 11:59 p.m. ET on Aug. 21, 2024. If Paramount Global is engaged in talks with a prospective bidder that the board’s special committee for M&A has determined “in good faith is or would reasonably be expected to lead to a Superior Proposal,” the company may extend the go-shop period until Sept. 5, 2024.
The “go-shop” provision of the deal was agreed to by the Skydance team in lieu of giving Paramount Global’s nonvoting shareholders approval over the deal, and it’s seemingly intended to minimize the threat of shareholder litigation against the Paramount board and Shari Redstone’s National Amusements Inc., which owns the controlling voting stake in Paramount.
“The special committee [of Paramount’s board] has done a full and exhaustive and fair process to land the transaction with us,” David Ellison, CEO and founder of Skydance Media, told Paramount investors in a presentation Monday. “So we believe it’s appropriate… if anybody comes out of the woodwork to give them 45 days to see if that happens.”
There’s no sign yet that anyone else will come forward to snatch Paramount away from Skydance. In May, Sony Pictures and private-equity giant Apollo Global Managementemerged as prospective bidders for Paramount Globalbut have since backed off their $26 billion all-cash offer to buy the entire company.
