Paramount Stock Tumbles as Shari Redstone Cancels Merger

In a dramatic turn of events, Paramount Global’s stock continued its downward trajectory following the announcement by Shari Redstone to terminate merger discussions with Skydance Media. Redstone, who controls Paramount through National Amusements Inc. (NAI), revealed that the company could not reach agreeable terms for the acquisition. This decision has notably impacted the stock market, causing Paramount shares to drop approximately 2% in early trading on Wednesday, compounding the nearly 8% decline observed on Tuesday.

The potential merger with Skydance had garnered significant attention due to the collaboration history between the two companies on blockbuster franchises such as “Mission Impossible,” “Top Gun: Maverick,” and “Transformers.” Skydance had adjusted its offer multiple times, addressing concerns from nonvoting shareholders. The final proposal, valued at $8 billion, included purchasing NAI’s controlling stake in Paramount for approximately $2 billion and a cash injection of $1.5 billion to alleviate Paramount’s debt.

Redstone’s shift in strategy includes a potential sale of just NAI instead of merging Paramount with another entity. Prominent figures like Hollywood producer Steven Paul and media executive Edgar Bronfman Jr. have shown interest in this new development. The sudden cancellation came despite an independent committee from Paramount’s board having recently recommended the economic benefits of the Skydance deal, which was slated for a vote on Tuesday.

Despite the current uncertainties, co-CEO Chris McCarthy emphasized the inherent value in Paramount’s assets and expressed confidence in unlocking this value through strategic adjustments. Co-CEO George Cheeks highlighted the necessity of operating more efficiently, citing redundancies in teams and functions across various sectors, such as real estate, technology, and marketing.

Amid the merger upheaval, Paramount is undergoing significant internal changes. CEO Bob Bakish departed in late April after clashing with Redstone over the Skydance deal, and he has been replaced by a consortium of three division heads forming the “Office of the CEO.” At the recent annual shareholder meeting, executives unveiled a cost-cutting plan aiming to reduce expenses by $500 million through layoffs and potential asset sales.

This merger breakdown has opened the field for other interested parties, including Sony Pictures Entertainment, Apollo Global Management, Warner Bros. Discovery, and media mogul Byron Allen. Shari Redstone, who had initially favored the Skydance deal, will now explore other avenues to drive value creation for Paramount shareholders.