Paramount Explored Warner Bros. Merger Before Skydance Deal

In a recent regulatory filing, Paramount Global disclosed months-long discussions with Warner Bros. Discovery Inc. regarding a potential merger, which ultimately did not come to fruition. The filing, made public on Monday, outlines Paramount’s extensive search for a strategic partner or buyer prior to reaching a merger agreement in July with Skydance Media, an independent film and television company founded by David Ellison.

According to Bloomberg, the document reveals that Paramount held discussions with at least 12 potential bidders, each referenced anonymously as “Party A” through “Party L.” Among these, Warner Bros. Discovery, which sources identify as “Party A,” engaged in detailed talks with Paramount starting in December, led by Paramount’s then-CEO Bob Bakish and Warner Bros. CEO David Zaslav.

The two media companies and their advisory teams began exploring possibilities, but as the filing indicates, discussions stalled by February when Warner Bros. failed to present a concrete merger proposal. Paramount’s board committee, responsible for overseeing the negotiations, decided at that point to stop sharing financial data with Warner Bros. Zaslav, however, continued to express interest and reportedly reached out to Bakish as late as Feb. 28, saying he remained open to a deal. Despite these ongoing discussions, it became clear that a cash payment and favorable valuation would be essential to secure approval from National Amusements Inc., Paramount’s controlling shareholder held by the Redstone family. According to the filing, Warner Bros.’ valuation and terms did not align with these conditions, leading to further challenges in closing the deal.

Related: Paramount Global Investor Sues to Block Skydance Media Merger

Per Bloomberg, Zaslav continued speaking with Paramount representatives into April, suggesting the possibility of a merger without cash payments for shareholders. Yet, with no formal offer materializing, Paramount ultimately shifted its focus.

The decision to explore strategic alternatives reportedly stemmed from Paramount’s underwhelming financial performance in May 2023, according to the regulatory filing. Facing lower-than-anticipated results, Paramount’s board opted to reduce its dividend, shrinking the annual cash allocation to National Amusements from over $60 million to approximately $13 million. This move, Bloomberg notes, spurred the Redstone-controlled entity to weigh its options, setting off months of negotiations with potential partners.

Among the entities Paramount engaged was Comcast Corp., identified in the filing as “Party B,” led by CEO Brian Roberts. Initial discussions with Roberts in January centered around potential content licensing deals rather than a full acquisition. By February, Roberts proposed a potential joint venture between Comcast’s streaming platform, Peacock, and Paramount+, contingent on Comcast maintaining majority control.

Paramount also explored an offer from media mogul Byron Allen, designated as “Party D.” Allen had previously expressed interest in acquiring Paramount assets but failed to submit specific financing details for this potential deal. Paramount’s legal team sent Allen a nondisclosure agreement to facilitate access to confidential data, but he did not sign the document, leaving negotiations stagnant.

As these various negotiations ultimately failed to yield a viable partnership, Paramount moved forward with its merger with Skydance Media, marking a new direction for the company amidst a challenging media landscape.

Source: Bloomberg