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Paradance? Skymount?

In a move poised to reshape the media industry, Paramount and Skydance have reached a preliminary merger agreement, according to four insiders familiar with the negotiations. This potential merger follows months of on-again, off-again discussions that stalled abruptly in June, only to be revived weeks later.

The merger still requires approval from a special committee of Paramount’s board of directors. If sanctioned, the deal will merge Paramount — the parent company of CBS, MTV, and Nickelodeon — with Skydance, the dynamic studio behind hits like “Top Gun: Maverick.” This union would create a formidable new entity in Hollywood, reflecting a significant shift in the media landscape as legacy companies struggle to adapt to the changing dynamics of cable TV decline and unprofitable streaming services.

The prospective merger signifies a generational shift. Shari Redstone, who controls Paramount through National Amusements, represents a family with deep roots in the media industry. The new company would instead be bolstered by heavyweight investors, including private-equity firm RedBird and David Ellison, son of Oracle founder Larry Ellison.

The road to this agreement has been tumultuous. Paramount and Skydance initiated exclusive talks in April, only for them to lapse in May without a deal. Negotiations persisted despite the emergence of other interested parties. A deal seemed imminent in June after extensive negotiations, but talks collapsed when National Amusements’ lawyers abruptly ended the discussions just as Paramount’s special committee was set to vote.

Following this breakdown, Paramount began charting a course for a standalone future amid a challenging media landscape. The company appointed three executives to a joint “office of the CEO” role, succeeding Bob Bakish, who stepped down as chief executive in April. They outlined plans to explore a streaming joint venture and implement $500 million in cost cuts, grappling with approximately $14 billion in debt. Investor concerns have been palpable, with Paramount’s shares dropping over 16% in the past month.

Critics argue that Paramount’s delayed entry into streaming has left it lagging behind competitors. Missed opportunities, such as the decision against selling assets like Showtime and BET despite lucrative offers, have also been highlighted.

Negotiations between Skydance and National Amusements resumed after a brief cooling-off period, yielding more favorable financial terms for Ms. Redstone. National Amusements’ equity would be valued at $1.75 billion, slightly up from $1.7 billion previously, and would offer enhanced protection against potential shareholder lawsuits — a critical sticking point in earlier talks.

The agreement includes a 45-day “go-shop” period for Paramount to entertain other suitors. Interested parties include billionaire Barry Diller’s IAC, media executive Edgar Bronfman Jr., and Hollywood executive Steven Paul.

As Paramount’s board committee evaluates the revised terms, the media world watches closely, aware that this deal could mark a significant transformation in the industry’s future.