Paramount and Skydance inch closer to a merger as key hurdle looms, sources say

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Paramount Global and Skydance Media are making progress on a deal that would merge the media companies and buy out controlling shareholder Shari Redstone, according to people familiar with the matter. Paramount Global's special committee, in charge of accepting or rejecting transactions, and David Ellison's Skydance Media, backed by private equity firms KKR and RedBird Capital Partners, are narrowing in on how to value Skydance's assets as part of a merger, as well as how much equity to add to the company as part of a recapitalization, the people told CNBC. The sides are close to agreeing on a value for Skydance, said the people, who asked not to be named because the discussions are private. The entertainment company would be valued at around $5 billion and merged with Paramount Global, they said. Skydance CEO Ellison and the private equity firms plan to raise roughly $4.5 billion to $5 billion in new equity, the people said; some of that — about $2 billion — would be used to pay Redstone, and another substantial portion would be used to pay down debt. The buyers would ideally like to get a deal done in May, said the people. Three of the people said that Paramount Global was slow to provide data during due diligence to the Skydance consortium, which has slightly pushed back the timeline on a deal. The exclusivity window on merger talks ends May 3, but the Skydance consortium wants to extend it by two weeks, said the people. Skydance plans to name Ellison as CEO of Paramount Global and former NBCUniversal CEO Jeff Shell as president, said two of the people. Current Paramount CEO Bob Bakish would depart the company, the people said. Separately, private equity firm Apollo Global Management and Sony have held preliminary discussions about teaming up for a deal that would buy out all Paramount Global shareholders at a premium, according to people familiar with the matter. The special committee hasn't received concrete details on that offer and isn't viewing it as a competitive bid to Skydance's interest, two of the people said. Still, the committee had more details on an initial offer made by Apollo, which it chose to ignore in favor of exclusive talks with Skydance, one of the people said. The special committee favored Skydance's offer over Apollo's in part because it offered shareholders future upside by keeping the company public with a cleaner balance sheet, the person said. Spokespeople for Apollo, the Paramount Global special committee, Paramount Global, and Skydance's consortium declined to comment.