After more than six months of grueling negotiations, David Ellison thought he was on the verge of landing the deal of a lifetime: the takeover of Paramount, a century-old Hollywood studio.
Ellison received the message Tuesday morning in Los Angeles from adviser Shari Redstone, the heiress who controls the media group behind the classics, including Godfather, Chinese district and Titanic, that all the financial details of the deal have been settled. At a meeting Tuesday at 2:30 p.m. (New York time), Paramount’s special committee planned to accept the proposal from Ellison’s company, Skydance Media.
And then came the plot twist. Minutes before the independent advisers evaluating the Skydance bid were to make a recommendation, Redstone Ropes & Gray lawyers sent terse emails to a special board committee saying the deal was dead. “While it is true that we have agreed on all the material economic terms, there are still other terms and we are essentially backing down,” the report said, according to a person with knowledge of the matter, who paraphrased its content.
“Shari effectively killed a deal that was fully negotiated, fully finalized in all key economies two minutes before the special committee meeting,” the person added. “That was it.
It was an abrupt, bitter end to a story whose two protagonists had formed an unlikely bond. Both are the children of hard-charging billionaire fathers: Redstone, 70, is the daughter of Sumner Redstone, who built the media and entertainment empire that is at the core of Paramount — a group that also includes the CBS television network, MTV, Comedy Central. and Nickelodeon. Ellison’s father, Larry, is the billionaire co-founder of software group Oracle.
David Ellison also has a deep connection with Paramount, having produced a number of blockbusters alongside the studio, including Top Gun: Maverick.
But their bond has weakened in recent weeks as they clashed over the details of the deal – and there was speculation that Redstone had doubts about letting the family business go. When it was all over, the exasperated counselors said they couldn’t remember a worse process. And observers from Wall Street to Hollywood were left wondering what Redstone’s next move would be.
Paramount gave Ellison a rare opportunity to gain control of one of Hollywood’s crown jewels, steeped in history with its iconic Melrose Avenue property and century-old film library.
The studio struggled to adapt to the digital era, but Ellison, 41, believed he could solve the group’s problems. Its once-mighty, generation-defining TV channels like MTV are in long-term decline, while streaming service Paramount+ is losing money.
Paramount, which has a stock market value of less than $8 billion, has more than $14 billion in debt that was recently downgraded to junk. Investors lost faith that the company could compete on its own, and it became the subject of takeover speculation for several years. The stock has fallen 30 percent this year, including a nearly 15 percent drop since the talks were called off.
Closing a deal is never going to be easy. Ellison’s plan had two steps: First, his company would buy National Amusements (NAI), a Redstone-controlled group that owns 77 percent of Paramount’s voting stock. Then Paramount gets Skydance in on the action.
The first cracks appeared in May when Ellison’s consortium, which included private equity groups RedBird and KKR as well as his family’s assets, modified its offer after it became clear that Paramount’s common shareholders planned to fight back. Several non-voting holders of Paramount stock publicly threatened to sue if the deal went through, saying all the value would go to Redstone, which holds the majority of voting stock.
So Ellison’s team decided to pay NAI—and by extension Redstone itself—less than originally proposed to sweeten the deal for Paramount’s B shareholders.
After Skydance decided in May to drop its bid for NAI from $2.5 billion to $2.3 billion, including debt, Redstone stopped talking to Ellison, saying people had been briefed on the matter. Others involved said the decision to stop communications was out of respect for the negotiation process with the special committee. NAI eventually agreed to a lower offer of $2.3 billion, the people added.
However, Redstone began to lose confidence in Ellison after the revised offer, those close to her said. The same people added that despite Redstone’s changing perception of Ellison, the Skydance founder was highly respected by NAI and Paramount advisers for his integrity throughout the process.
It was only after Ellison was told the deal was dead that Redstone informed him she was upset by the reduced cash offer for her stake, the person close to her said. “She was unhappy she didn’t get more,” the person said.
Others close to Redstone disputed that, saying the deal collapsed because Ellison’s camp resisted calls to allow non-voting shareholders to register their “agreement” — or lack thereof — with the transaction through some kind of tally. “That would obviously provide protection against shareholder lawsuits,” said another person familiar with Redstone’s thinking.
People close to Skydance and Paramount said Redstone decided to use the “consent” vote as a last-minute excuse to close the deal; the matter was clarified at the very beginning of the negotiations.
As Redstone continued to sell, there were more signs of friction. In April, Redstone fired its longtime trusted CEO Bob Bakish, who had made no secret of his opposition to the Skydance deal and continued to hold talks with other potential suitors. She replaced Bakish with three Paramount executives who formed the “Office of the CEO”. Four board members also left this spring.
Other potential suitors came and went during the process. Paramount’s stock fell in December when it was revealed that Bakish had met with his Warner Bros Discovery counterpart, David Zaslav. Private equity group Apollo approached Paramount twice, most recently with Sony as a partner. And this week, Seagram heir Edgar Bronfman Jr. joined Bain Capital.
Multiple people directly and indirectly involved in the process said there was more than money that convinced Redstone to back out of the deal with Ellison, which she had begun months earlier.
Several people said Redstone was unable to say goodbye to the company founded by her grandfather and built into a global powerhouse by her father, with whom she had a strained relationship.
Redstone appears to have warmed to turnaround plans drawn up by three members of the CEO’s office — a group many expected to be mere placeholders until the Skydance deal is finalized. But last week they unveiled a plan to cut costs and reorganize the group, and she gave them her blessing.
“If all Skydance is going to do is take costs out of the business and streamline streaming, we could do it ourselves without the risk of litigation and 12 to 18 months [to get to] closing,” said one person familiar with the strategy.
But some investors seem confused by the idea. “As a trustee model, it could be OK,” said John Rogers, chairman and co-director of Ariel Investments. “But I haven’t experienced anything where you have a long-term agreement with three leaders. It’s just not normal.”
Several people, including former and current board members, said another factor working against Skydance was the role played by Charles Phillips, a Paramount board member who tried to torpedo the deal throughout the process.
Phillips, who worked at Oracle until 2010, opposed the deal and often spoke out against it, former and current Paramount board members said. He did so by putting numerous obstacles in the way of a deal with Skydance and by speaking negatively about Ellison’s family to Redstone, the people said.
A number of people involved in the trial said that Phillips should have recused himself from the trial because he was personally opposed to the Ellison family because of their history. Phillips did not immediately respond to a request for comment; a person close to the board disputed the claim, saying they had “deep respect for Ellison”.
From the opposite direction, it was another Oracle veteran: Larry Ellison himself, who became more involved as the negotiations drew to a close. Some in the Redstone camp have pointed to Larry Ellison’s involvement as a reason why tensions have risen over the past week. “The more Larry gets involved, the more the relationship deteriorates,” said one person familiar with the situation. “David had affection, but Larry has sharper elbows.”
Another person involved in the deal talks dismissed such concerns. “Larry was obviously involved,” he said. “Larry was writing a big check.
Whatever the tension, David Ellison believed he would sign a deal to acquire Paramount this week. “Everything has been resolved,” said one person involved.
Like a classic Hollywood cliffhanger, the collapse leaves Redstone in custody with no apparent way out. Paramount is small, struggling and writhing under a mountain of debt, and its stock price is in freefall. Her family’s fortunes are strained by the financial pressures of her father’s death. And NAI has its own debt burden. Still, even after months of negotiations, people close to Ellison’s bid say they aren’t sure what motivated Redstone to pull the plug.
“Finally, [maybe] she got to the finish line and decided she couldn’t sell her inheritance,” one of them said.