WHEN: Today, Monday, June 3, 2024
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of breaking news from CNBC's David Faber on "Squawk on the Street" (M-F, 9AM-11AM ET) today, Monday, June 3. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2024/06/03/faber-report-skydance-poised-to-announce-takeover-of-paramount.html.
All references must be sourced to CNBC.
DAVID FABER: We're at the end on Paramount and the reason I say that is the following. The terms have been agreed to between the special committee and the buying group of course of Skydance That's David Ellison and RedBird, the private equity firm that has been at this for so many months. And of course, we've reported on all of the ups and downs here. It was really always theirs potentially to have, you know, I talked briefly about obviously interest from Sony and Apollo but also had made it clear that that never really amounted to as much perhaps as that had been hoped by some of the B holders out there. And now, the deal as I understand it is awaiting a sign off from the control shareholder of Paramount that is Shari Redstone, who owns National Amusements where the 77 roughly percent of the votes are held in the A shares that she controls there. That is expected to come and so we are going to have an announcement. I don't know if it's going to be in the next 24 or 48 hours, but very soon it would seem of a deal. And it's quite a deal by the way to go through. Let me give you some of the details as I understand them having spoken to people familiar with the situation, alright. Shari Redstone, she's going to get $2 billion for National Amusements, that number has been out there for some time that is roughly the correct number. Here's where things get interesting and perhaps it's a bit more complex. Skydance at the close of the transaction whenever that will be is going to tender for almost not quite but high 40 percents of the B shares at 15. So if you're a holder of the B shares, you're going to be able to sell almost half of your shares at 15. And then you're going to be left with equity in NewCo because NewCo is also going to include Skydance, remember that's getting brought in, by the way that is being brought in now I'm told at a value that is less than had been previously sort of tossed around the $5 billion number had been used. Now I'm hearing it's in the high 4 billion. So they're reducing the value overall of Skydance that gets rolled in and then as well, Skydance, RedBird, Larry Ellison obviously is part of this, they're going to contribute a billion and a half in cash to Paramount's balance sheet. That is essentially was viewed as debt reduction, trying to get them on the path to investment grade growth capital. And what do you end up with here. You really end up with in many ways what is a private equity deal, for lack of a better term, that really is you're gonna have a public equity stub roughly a third of the shares currently outstanding now will be held by B holders or held by shareholders and the remainder of the economics will be held by Skydance and RedBird. And of course they also will control the company through its A shares. The numbers are pretty staggering because it's $2 billion for Shari Redstone. It's four and a half billion, four and a half billion that will be used to buy out roughly almost 50% of those B shares. And it's a billion and a half in cash contributed to the balance sheet. Add that up. That's $8 billion here. Now of course, we know Larry Ellison's got multiples and multiples of that but RedBird for its part as well, roughly 10 billion right now under management, certainly going to be raising new funds as well to contribute that significant sum to getting this deal done. And don't forget the risk that they're taking on here as well. Of course, you're talking about a company that has no shortage of challenges that is currently run by three different people. Some people have taken, calling it the Pep Boys are running Paramount, and that's going to be in process for quite some time and so you don't know even how much the assets are going to be diminished over that time period before you're committed to step up and spend that kind of money but there is a belief that it seems certainly on the Skydance and RedBird part that once they merge Skydance in and once they start to execute the strategy that they believe they can put in place, it will bring significant accretion of value. A lot more on that strategy in the days to come, of course, and one would expect it from when they announce the deal we'll start to hear a lot more as well. This deal is not going to require a vote of the majority or the minority, right. The whole process with the special committee replaced that there's no no vote that's going to be required here because potentially that wouldn't go their way and that was part of the negotiations. There will be an annual meeting tomorrow strangely, you may get that without any real announcement here of the actual transaction again, and you know, as for the go it alone strategy that at least one director had sort of been espousing, there's a belief generally speaking, that not being investment grade, not having access to the capital they need to potentially get there, there simply was not a path that was viable for Paramount to really think and could pursue versus the opportunity to give its shareholders a significant exit here. And an exit apparently a lot of them want so we are very close to concluding at least this part. But Jim and Carl what that means for the future of Paramount as you wait for a close, by the way, who knows how long that could be? You've got FCC has got to sign off. Right? CBS is owned here. You know, we'll have to wait and see.