After more than six months of grueling negotiations, David Ellison thought he was about to make the deal of a lifetime: the acquisition of Paramount, the century-old Hollywood studio.
Ellison received word Tuesday morning in Los Angeles from an adviser to Shari Redstone, the heiress who controls the media group behind classics, including The godfather, Chinatown And Titanic, that all financial details of the deal had been ironed out. At a meeting at 2:30 p.m. (New York time) on Tuesday, Paramount’s special committee planned to greenlight the proposal from Ellison’s company, Skydance Media.
And then came the plot twist. Minutes before the independent consultants evaluating the Skydance bid were to recommend it, Redstone’s lawyers, Ropes & Gray, sent a terse email to the special governance committee saying the deal was dead. “While it is true that we agree on all material economic terms, other terms are open and we are effectively withdrawing,” said a person with knowledge of the matter, paraphrasing its contents.
“Shari effectively killed a deal that was fully negotiated and fully finalized on all key economic points two minutes before the special committee meeting,” the person added. “That was that.”
It was an abrupt, bitter end to a story in which the two protagonists had formed an unlikely bond. Both are children of hard-working billionaire fathers: Redstone, 70, is the daughter of Sumner Redstone, who built the media and entertainment empire that is at the heart 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 Oracle, the software group.
David Ellison also has a deep connection with Paramount, having produced a number of blockbusters alongside the studio, including Top Gun: Maverick.
But in recent weeks their bond weakened as they fell out over the details of the deal – and speculation arose that Redstone was having second thoughts about letting go of the family business. When it was all over, exasperated advisors said they couldn’t remember a messier process. And observers from Wall Street to Hollywood have been wondering what Redstone’s next move will be.
Paramount offered Ellison a rare opportunity to take control of one of Hollywood’s crown jewels, rich in history with its iconic Melrose Avenue lot and century-old film library.
The studio has struggled to adapt to the digital age, but Ellison, 41, believed he could solve the group’s mounting problems. The once-mighty, generation-defining television channels like MTV are in long-term decline, while the streaming service Paramount+ is losing money.
Paramount, which is valued at less than $8 billion on the stock market, has more than $14 billion in debt, which has recently been relegated to junk. Investors have lost confidence that the company can compete on its own, making it the subject of takeover speculation for years. Shares are down 30 percent this year, including a drop of nearly 15 percent since the talks were called off.
Getting the deal done was never going to be easy. Ellison’s plan consisted of two steps: First, his company would buy National Amusements (NAI), the Redstone-controlled group that owns 77 percent of Paramount’s voting stock. Then Paramount would acquire Skydance through a stock deal.
The first cracks emerged in May when Ellison’s consortium, which also included private equity groups RedBird and KKR and his family’s fortune, adjusted its offer after it became clear that Paramount’s common shareholders planned to fight back. Several holders of Paramount’s non-voting shares publicly threatened to sue if the deal went through, saying all the value would go to Redstone, which owns the majority of the voting shares.
So the Ellison team decided to pay NAI – and by extension Redstone himself – less than originally proposed to sweeten the deal for Paramount’s B shareholders.
After Skydance decided in May to reduce its offer to NAI from $2.5 billion to $2.3 billion, including debt, Redstone stopped talking to Ellison, people briefed on the matter said. Others involved said the decision to stop communications was out of respect for the negotiation process with the special committee. These people added that NAI ultimately agreed to the lower offer of $2.3 billion.
Still, Redstone began to lose confidence in Ellison after the amended offer, people close to her said. The same people added that despite Redstone’s changing perception of Ellison, the Skydance founder was highly respected by the NAI and Paramount’s advisors for his integrity throughout the process.
Only after Ellison was told the deal was done did Redstone tell him she was upset about the reduction in the cash offer for her stake, a person close to her said. “She was unhappy she didn’t get more,” the person said.
Other people close to Redstone disputed this, saying the deal fell through because Ellison’s camp resisted calls to allow non-voting shareholders to register their “consent” – or lack thereof – to the transaction via a kind of count. “That would obviously have provided 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 end the deal; the issue had been clarified at the start of the negotiations.
There were further signs of friction as Redstone continued the sale. In April, Redstone fired its longtime CEO, Bob Bakish, who had made little secret of his opposition to the Skydance deal and continued talks with other potential suitors. She replaced Bakish with three Paramount executives who formed an “office of the CEO.” Four board members also left this spring.
Throughout the process, other potential bidders came and went. Paramount shares fell in December when it emerged that Bakish had met his counterpart at Warner Bros Discovery, David Zaslav. Private equity group Apollo approached Paramount twice, most recently with Sony as a partner. And this week, Edgar Bronfman Jr., Seagram’s heir, took action with Bain Capital.
Multiple people directly and indirectly involved in the lawsuit said there was more than just money that convinced Redstone to walk away from a deal she entered into months ago with Ellison.
Several people said Redstone couldn’t bear to say goodbye to a company founded by her grandfather and built into a global force by her father, with whom she had a fraught relationship.
Redstone appeared to have warmed to the turnaround plans laid out by the three members of the CEO’s office — a group that many had expected would be just placeholders until the Skydance deal was completed. But last week they launched a plan to cut costs and reorganize the group, and she gave them her blessing.
“If Skydance just wants to take costs out of the business and streamline the streaming business, we could just do that ourselves, without the risk of a lawsuit and 12 to 18 months. [to get to] close,” said a person familiar with the strategy.
Some investors, however, seem baffled by the idea. “It could be great as an interim model,” said John Rogers, chairman and co-CEO of Ariel Investments. “But I haven’t seen anything where you had a long-term agreement with three leaders. It’s just not normal.”
Several people, including former and current board members, said another factor against Skydance was the role of 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 frequently spoke out against it, former and current Paramount board members said. He did this by putting up numerous roadblocks to a deal with Skydance and talking negatively about the Ellison family to Redstone, the people said.
A number of people involved in the trial said Phillips should have recused himself from the trial because he was personally against 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 he has “deep respect for the Ellisons.”
From the other side came another Oracle veteran: Larry Ellison himself, who became increasingly involved as the negotiations drew to a close. Some in the Redstone camp pointed to Larry Ellison’s participation as the reason tensions have risen in the past week. “The more Larry gets involved, the more the relationship deteriorates,” said a person familiar with the situation. “There was a fondness for David, but Larry is more pointed.”
Another person involved in the deal talks dismissed such concerns. “Larry was clearly involved,” he said. “Larry was writing a big check.”
Whatever the tensions, David Ellison believed he would sign a deal to acquire Paramount this week. “Everything was resolved,” said one person involved.
Like a classic Hollywood cliffhanger, the collapse leaves Redstone in trouble with no clear way out. Paramount is small, struggling and writhing under a mountain of debt, and its stock price is in freefall. Her family’s wealth is strained by the financial strain related to her father’s death. And the NAI has its own debt burden. But even after months of negotiations, people close to Ellison’s offer say they’re not sure what motivated Redstone to pull the plug.
“Finally [maybe] she reached the finish line and decided she couldn’t sell her estate,” one person said.