The full terms of the deal for Skydance Media’s acquisition of Paramount Global were revealed on Thursday. And, as expected, there are various limits on what Paramount and Skydance can do without the other party’s consent in the pre-closing period.
Under the terms of the deal, Paramount Global has the right to shop for a better offer in a 45-day window. And, as previously announced, Paramount will have to pay a $400 million split fee to the Skydance investor group.
Also detailed in the 273-page transaction agreement, disclosed in an 8-K filing, are several restrictions related to Paramount+.
Unless it obtains Skydance’s written consent, Paramount is prohibited from entering into any joint venture or “omnibus content licensing and/or subscriber acquisition/migration” agreement involving Paramount+. According to the terms of the contract, Paramount “will also consult with Skydance in good faith regarding any material developments” related to negotiations involving a JV deal for Paramount+.
In addition, Paramount may not enter into any new contract related to the Paramount+ package with “any of the seven major third-party streaming services (by US subscribers)” or make such an agreement “out of the Paramount also needs to get approval to make a deal that would extend the term of an existing streaming distribution deal by more than a year.
A potential broadcast partner for Paramount is Warner Bros. Discovery, which is open to exploring a combination of Max and Paramount+.
“We have had a lot of entries [inquiries] from a number of people about partnerships that may involve a partnership with another player or players. And so we’re going to value all of that,” according to Jeff Shell, a RedBird executive and former NBCUniversal CEO who will become president of Paramount when the deal closes. Shell, speaking at Monday’s presentation of investors, also noted that Paramount’s current management team “has come up with a plan potentially for the international business, which is likely to be executed between now and closing, which we also think will be quite compelling for generating cash flow of the DTC segment.”
Chris McCarthy, president and CEO, Showtime/MTV Entertainment Studios and Paramount Media Networks, said at a June 25 town hall meeting for employees that on the international front, “we are advancing talks with potential partners that will significantly transform scale and its economy [streaming] service making it profitable and bringing long-term value. This approach can also serve as a model for the US”
Meanwhile, there are other restrictions set 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. There are some exceptions to the green light approval provision, but what they are remains confidential.
Under the agreement with Skydance and financial backer RedBird Capital Partners, the special committee of Paramount’s board of directors has a 45-day period during which it will be allowed to “actively seek and evaluate alternative acquisition proposals.” According to Paramount, it “does not intend to disclose developments related to the trade store process unless and until it determines that such disclosure is appropriate or otherwise required.”
The window expires at 11:59 p.m. ET on August 21, 2024. If Paramount Global is engaged in discussions with a potential bidder that the board’s special M&A committee has determined is “in good faith expected or reasonably expected to lead to a Superior Proposal”, the company may extend the store period until September 5, 2024.
The deal’s “go-shop” provision was agreed to by the Skydance team in lieu of giving Paramount Global shareholders no vote on the deal and is apparently intended to minimize the threat of shareholder litigation against Paramount’s board and National Amusements of Shari Redstone. Inc., which owns the controlling voting interest in Paramount.
“The special committee [of Paramount’s board] has done a thorough, exhaustive and fair process to complete the transaction with us,” David Ellison, CEO and founder of Skydance Media, told Paramount investors in a presentation on Monday. “So we believe it’s a good fit. .. if anyone comes out of the woodwork, give them 45 days to see if that happens.”
There’s no sign yet of anyone else coming forward to wrest Paramount from Skydance. In May, Sony Pictures and private equity giant Apollo Global Management emerged as potential bidders for Paramount Global, but have since dropped their $26 billion cash offer to buy the entire company.