Paramount drama heightens as Edgar Bronfman Jr. submits bid

Former top Seagram and Warner Music executive Edgar Bronfman Jr. has entered the fray to acquire Paramount Global, throwing an 11th-hour curveball in an already chaotic auction of the storied Hollywood entertainment company.

Bronfman submitted a bid Monday to take control of the media conglomerate that owns CBS, MTV, Comedy Central and the Paramount film studio by acquiring the Redstone family's private holding company, National Amusements Inc., said four sources familiar with the matter who were not authorized to comment publicly. Bronfman's bid is valued at about $4.3 billion.

The offer comes a month after Shari Redstone and Paramount's other board members approved a bid from tech scion David Ellison’s Skydance Media to buy Paramount in a multipronged transaction valued at $8.4 billion.

Bronfman is leading an investor group that includes longtime media executives Jon Miller, Steven Paul and John Martin.

"We believe there is significant upside in the Paramount business and in the value of Paramount’s shares," Bronfman wrote in a letter to Paramount's lead independent director, Charles Phillips, which was viewed by The Times.

Bronfman's offer lands just two days before Paramount's window to accept alternative bids to Skydance's proposal closes. Paramount's special board committee, led by Phillips, must now weigh the two offers for the struggling media company. The directors are expected to extend their decision deadline to early September — allowing more jockeying in a process that some observers had thought was stitched up.

Skydance's deal allowed for a 45-day window during which Paramount could consider competing offers. Board members had pressed for the "go-shop" provision, hoping it would help shield the company as it battles shareholder lawsuits over the deal.

The Skydance team agreed to the provision, betting the company's bid would prevail even if there were latecomers to the auction.

A Paramount spokesperson declined to comment on Bronfman's bid, which was first reported by the Wall Street Journal.

Representatives of Redstone, Bronfman and Skydance all declined to comment.

It's not clear that Bronfman's play for Paramount will prevail.

Shari Redstone has preferred Ellison’s bid over those of other potential suitors, believing the 41-year-old entrepreneur possesses the ambition, experience and financial heft to lift Paramount from its doldrums.

His father, Oracle Corp. co-founder Larry Ellison, is backing his son's effort to build a larger media empire by merging Skydance and Paramount. Redstone warmed to the younger Ellison during their meetings. They both were children of enormously successful and strong-willed fathers. But, above all, Redstone appreciated that Ellison wanted to keep Paramount whole and expand the company, according to people familiar with her thinking.

Other potential suitors intended to sell off Paramount assets to pay down debt.

Under terms of its proposed deal, Skydance and financial backers RedBird Capital Partners and private equity firm KKR have agreed to provide a $1.5-billion cash infusion to help Paramount pay down debt. Their deal sets aside $4.5 billion to buy shares of Paramount’s Class B shareholders who are eager to exit.

Non-Redstone Class A shareholders would receive $23 a share to exit. Investors could maintain their shares in the new entity.

But some shareholders have bristled over Ellison's terms, alleging that the deal places an inflated value on Skydance, which has co-produced some of Paramount's biggest blockbuster movies, including "Top Gun: Maverick," and dilutes their shares.

The subsequent all-stock merger of Skydance into Paramount values Ellison's firm at $4.75 billion.

"Our proposal eliminates the risks, uncertainties and costs of combining Paramount with Skydance," Bronfman wrote. "We believe Paramount is most valuable as a standalone business."

The media company has been reeling from a steep decline in cable programming fees as consumers shift to streaming. Paramount is being managed by a trio of division leaders after Chief Executive Bob Bakish was ousted last spring after wrangling with Redstone and other board members.

Employees are weary. Paramount earlier this month initiated a deep round of cost-cutting, including eliminating about 2,000 jobs to achieve $500 million in annual savings. The company suffered a credit downgrade earlier this year.

Paramount closed a TV production studio last week and took a $6-billion write-down for the diminishing value of its cable channels.

Bronfman's group believes it could save an additional $3 billion in costs by boosting profits in the streaming division, employing artificial intelligence in business functions and "right sizing the bloated corporate structure," according to the letter.

Under both scenarios, the Redstone family would receive $1.75 billion for National Amusements — a company that holds the family’s Paramount voting shares and a regional movie theater chain founded during the Great Depression — after the firm’s considerable debts are paid off. Both deals would allocate $2.4 billion to acquire NAI.

Bronfman's group also would match other Skydance terms. For example, they would raise $1.5 billion to strengthen Paramount's finances by issuing new Class B shares in the company.

Non-Redstone Class A shareholders would be paid $24.53 a share to convert their holdings to Class B shares, according to Bronfman's letter. That's slightly more than envisioned in the Skydance deal. (Bronfman's offer does not include any money for Class B shareholders).

Bronfman has agreed to cover the $400-million breakup fee Paramount would be obligated to pay Skydance if the deal doesn't close.

"Even if Paramount’s Board ultimately chooses Bronfman over Skydance, it is all a moot point if NAI (meaning the Redstones) are not in favor of Bronfman’s bid," media analyst Rich Greenfield wrote in a recent post for investors. "All that really matters is which suitor the Redstones want."

That's not clear. Redstone has long been friendly with Bronfman and seemed willing to entertain his bid earlier this summer. In addition, one of her former business partners is a key member of his group. She worked closely with Miller, a former Fox and AOL executive, at her boutique investment firm, Advancit Capital, which is managed by her son-in-law.

Bronfman's group has raised more than $5 billion, according to its letter. Other investors include the filmmaker Paul, who runs Integrated Media and Atlas Comics; and Martin, Time Warner's former chief financial officer. The investment group includes a dozen individuals, including former child actor and crypto currency investor Brock Pierce; San Francisco-based activist investor Jeff Ubben and his wife, Laura Ubben.

If his group succeeds, Bronfman would become Paramount's CEO.

Paramount shares Tuesday closed down 1.2% to $10.94.

In the last five years, the New York-based company has lost two-thirds of its value, squeezed by pandemic-related theater closures, a heavy debt burden and last year's Hollywood labor strikes.

This story originally appeared in Los Angeles Times .