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The Battle of the Billionaires – Edgar Bronfman Jr & David Ellison Fight for Control of Paramount 

Edited by: TJVNews.com

The fight for control of Paramount Pictures has escalated into a high-stakes duel between two powerful billionaire dynasties, each with a legacy steeped in media and technology. On one side stands David Ellison, the founder of Skydance Media and son of Oracle’s billionaire founder Larry Ellison. On the other is Edgar Bronfman Jr., the media executive and grandson of Seagram mogul Samuel Bronfman, who has made a surprising and ambitious bid to wrest control of Paramount from Ellison’s grasp.

Edgar Bronfman Jr.’s last-ditch bid to take over Paramount was met with widespread surprise and skepticism. With Skydance’s $8 billion deal already on the table and the company’s strategic alliance with Shari Redstone, many insiders questioned who would take Bronfman’s unconventional coalition of investors seriously, according to a recently published report in The New York Times. However, as the week unfolded, it became clear that Bronfman’s bid was more formidable than initially thought, forcing Paramount’s board to reconsider its options.

Edgar Bronfman Jr. has walked away from bidding for Paramount, paving the way for the company to be sold to David Ellison’s Skydance Media https://t.co/oZGaP1zVml via @WSJ

— Tom Pauken II. (@tmcgregorchina) August 27, 2024

Bronfman’s bid has not only prolonged the process but has also transformed Paramount’s sale into a dramatic showdown between two storied families. The information in the NYT report indicated that David Ellison’s bid, backed by the financial might of his father Larry Ellison, seemed like a sure thing, particularly with the support of Shari Redstone, who inherited the media empire assembled by her father, Sumner Redstone. But Bronfman, whose early ventures in the media industry were marred by controversy and financial setbacks, has somehow managed to secure billions in commitments, presenting a serious challenge to Ellison’s plans.

Edgar Bronfman Jr. is no stranger to bold moves and the skepticism that often accompanies them. As was reported by the NYT, this ambition to build a media empire dates back to the 1980s, when he steered the Seagram Company, the family’s liquor business, into the entertainment industry. This move culminated in the ill-fated merger with Vivendi in 2000, a decision that many viewed as disastrous for Seagram, leading to the loss of the family’s control over the company.

The Vivendi merger cast a long shadow over Bronfman’s career, and he became a polarizing figure in both Wall Street and Hollywood. To some, he was the hapless heir who squandered a family fortune; to others, he was a misunderstood visionary who took risks that could have paid off under different circumstances, the NYT report observed.  Despite the setbacks, Bronfman fought his way back into the industry, most notably with his successful leadership of Warner Music Group, where he helped revive the company and took it public in 2005.

However, Bronfman’s legacy is further complicated by legal troubles. In 2011, he was convicted of insider trading under French law, stemming from trades related to Vivendi. The report in the NYT said that the conviction resulted in a $6.8 million fine and a 15-month suspended sentence, casting yet another cloud over his reputation. Bronfman has maintained that his trades were legitimate, but the conviction remains a controversial chapter in his career.

“Bronfman, Ellison & The Battle of the PowerPoints
The latest strategic considerations regarding Edgar Bronfman Jr.’s 13th-hour bid for Paramount, how the special committee is adjudicating the rival offers, and why David Ellison’s Skydance will almost certainly come out on top.”… pic.twitter.com/wR1iVtcgvB

— lithasblot 💪 📺 #SaveNCISHawaii ☀️ #BoycottCBS (@lithasblot) August 26, 2024

The current battle for Paramount is, in many ways, the culmination of Bronfman’s lifelong ambition to build a media empire. As Terry Kawaja, the founder of Luma Partners, a boutique investment bank, noted when speaking to the NYT, “He’s been craving a media empire since the 1980s, and Paramount is a great studio with a lot of upside potential. If you’re the billionaire son of a billionaire, it’s the ultimate asset.”

David Ellison, on the other hand, represents the new guard of Hollywood power players. With Skydance Media, Ellison has established a reputation for producing blockbuster films and TV shows, including the “Mission: Impossible” series and “Top Gun: Maverick,” according to the NYT report. His partnership with Shari Redstone to acquire Paramount seemed like a natural extension of his growing influence in the industry. The Ellison-Redstone alliance, backed by significant financial resources and a shared vision for the future of media, appeared unassailable—until Bronfman entered the fray.

Bronfman’s bid has now forced Paramount’s board to extend the “go shop” window, allowing the company to explore other potential buyers, a move that underscores the seriousness of his offer. The NYT report explained that this decision has effectively transformed the sale process into a bidding war, pitting the son of one billionaire against the son of another, with the future of one of Hollywood’s most storied studios hanging in the balance.

Since March, Bronfman has been quietly assembling his proposal, navigating complex negotiations, and rallying a diverse coalition of investors. However, the NYT report said that with a powerful competitor in Skydance Media and a looming deadline, his quest to acquire one of Hollywood’s most storied studios faces significant challenges.

Bronfman’s interest in Paramount began earlier this year, following the lapse of Paramount’s exclusive negotiation period with Skydance in the spring. This lapse provided a window of opportunity for Bronfman, who quickly moved to pitch his vision to Paramount’s board, the NYT reported.  Recognizing the need for substantial financial backing, he initially partnered with Bain Capital, a major private equity firm, to vet the investment and provide the necessary capital.

Edgar Bronfman Jr. has submitted a bid for Paramount Global setting up a billionaire battle with Skydance’s David Ellison. #paramount #para #edgarbronfoman #davidellison #deal #ma #billionairebattle $PARA pic.twitter.com/6NIykMz2GW

— StockPick Daily (@stockpick_daily) August 20, 2024

However, despite Bronfman’s initial momentum, the process moved slowly. While Bain Capital conducted its due diligence, Paramount continued its discussions with Skydance. As per the information contained in the NYT report, by July, Paramount had signed a deal with Skydance, leaving Bronfman scrambling as Bain Capital was still finalizing its assessment. The timing proved unfortunate for Bronfman, and Bain Capital ultimately dropped out, leaving him to seek alternative financing sources in a last-ditch effort to stay in the game.

Undeterred by Bain Capital’s withdrawal, Bronfman rapidly restructured his bid, courting new investors to form a viable coalition. Indicated  in the NYT report was that among the surprising names initially involved was Brock Pierce, a former child actor turned cryptocurrency entrepreneur, best known for his role in the “Mighty Ducks” movies. Though unconventional, this inclusion illustrated Bronfman’s willingness to think outside the box and leverage diverse financial resources.

As the bid evolved, Bronfman refined his list of backers, ensuring that those involved had the financial clout and industry expertise to be taken seriously by Paramount’s special committee. He also sought to strengthen his bid by bringing in seasoned media executives who could lend credibility and operational expertise to the endeavor. The report in the NYT confirmed that key figures included John Martin, the former CEO of Turner, and Jonathan Miller, a veteran media executive with deep industry ties. Martin’s involvement was facilitated by Jeff Bewkes, the former CEO of Time Warner, further highlighting Bronfman’s connections within the media world.

 

Understanding the importance of securing support from within Paramount, Bronfman embarked on a series of meetings with top executives from the company. He dined with George Cheeks, the top executive of CBS; Brian Robbins, the head of Paramount Pictures; and Chris McCarthy, the head of Paramount Media Networks and Showtime/MTV Entertainment Studios, as pointed out in the NYT report.  These three executives, who serve as Paramount’s co-CEOs, are pivotal players in the company’s future, and their support could be crucial in swaying the board’s decision.

Bronfman also focused on building a rapport with the Redstone family, who hold significant influence over Paramount through their ownership stake. Courting the Redstones was a strategic move aimed at aligning his bid with the family’s long-term vision for the company, potentially offering a counter-narrative to Skydance’s more straightforward acquisition proposal, according to the NYT report.

The NYT report said that the bid, which has already transformed into a high-stakes competition between two powerful media dynasties, now faces scrutiny over potential foreign ownership concerns due to Fortress’s partial ownership by Mubadala Investment Company, a sovereign wealth fund controlled by the United Arab Emirates (UAE).

Fortress Investment Group, a key player in Bronfman’s consortium, has raised eyebrows due to its ties to Mubadala Investment Company. The NYT report also said that given that Paramount owns CBS, one of the United States’ major broadcast networks, any foreign involvement in its ownership is subject to rigorous scrutiny by U.S. regulators. Critics of Bronfman’s bid argue that Fortress’s involvement could trigger national security concerns, complicating the deal and potentially giving Skydance an edge in the race for Paramount.

However, Bronfman’s camp has pushed back against these concerns. A person familiar with the proposal emphasized that Fortress and BC Partners Credit, the two largest institutional investors in Bronfman’s group, are collectively contributing roughly 20 percent of the capital, as was noted in the NYT report. This relatively modest stake, according to Bronfman’s supporters, mitigates the risk of foreign ownership. Furthermore, Fortress, while partly owned by Mubadala, is based in the United States and operates under the control of a board of directors appointed by its American partners. This structure, they argue, should reassure regulators that the firm’s involvement does not pose a significant foreign influence risk.

As Bronfman continues to advance his proposal, Skydance Media has been working behind the scenes to undermine his bid. The NYT reported that this week, Skydance submitted a letter to Paramount’s special committee, raising concerns about the fairness of the ongoing “go shop” process, which allows the company to consider alternative offers before finalizing its deal with Skydance. The letter accused Paramount of violating certain provisions of this window and requested that the committee halt negotiations with Bronfman immediately.

It’s remarkable how all three protagonists in this story—Shari Redstone, Edgar Bronfman Jr., and David Ellison—are heirs, dependent on their fathers’ money for their business careers. https://t.co/GZsx4ODID7

— Jacob Remes (@jacremes) August 20, 2024

Despite Skydance’s efforts to stymie Bronfman’s progress, the special committee has chosen to continue its discussions with him, suggesting that his bid remains a viable alternative in their eyes. The NYT report noted that this decision illustrates the committee’s interest in thoroughly exploring all potential offers, particularly in light of the complex considerations at play, including foreign ownership concerns, shareholder interests, and the strategic direction of the company.

At the heart of Bronfman’s pitch is the argument that his deal offers a better outcome for Paramount’s nonvoting shareholders, many of whom have expressed dissatisfaction with the terms of Skydance’s offer. Bronfman’s proposal is being crafted to appeal to these shareholders by addressing their concerns about control and the future value of their investment.

Skydance’s offer, while generous in terms of cash, effectively leaves shareholders with no control over the company. Additionally, the NYT report said that Skydance’s plan to merge with Paramount would require shareholders to dilute their holdings by absorbing Skydance, a business whose value has yet to be tested by the public market. This uncertainty has fueled skepticism among some investors, who are wary of the long-term implications of the deal.

In contrast, Bronfman’s bid, though still being finalized, is expected to offer less cash upfront but would give shareholders a full vote in the company’s future direction. Furthermore, the report in the NYT noted that Bronfman is positioning himself as an executive with extensive experience running large public companies, which he argues would provide more stability and a clearer vision for Paramount’s future. This approach seeks to reassure shareholders that their interests would be better served under his leadership, with more direct influence over the company’s strategic decisions.

As the deadline for the “go shop” period approaches, the battle between Bronfman and Skydance is intensifying. Paramount’s special committee faces the challenging task of weighing the merits of each bid, considering not only the immediate financial benefits but also the long-term implications for the company’s governance, regulatory risks, and market positioning.

Bronfman’s bid, while offering potential advantages in terms of shareholder control and corporate governance, is not without its risks. The involvement of a large and diverse group of investors could complicate the deal’s execution, especially if any key backers withdraw or fail to deliver the promised capital, as was indicated in the NYT report. Moreover, the foreign ownership concerns linked to Fortress could invite additional scrutiny from regulators, potentially delaying or even derailing the bid.

 

On the other hand, Skydance’s bid, backed by the financial strength of the Ellison family, presents a more straightforward option with significant cash incentives for shareholders. However, the lack of voting rights and the uncertainty surrounding Skydance’s untested market value may continue to be sticking points for some investors.

Bronfman’s bid has drawn both support and skepticism, but with backing from influential figures such as Barry Diller, the founder of IAC, Bronfman’s campaign is gaining momentum.

Barry Diller’s endorsement of Bronfman is rooted not just in personal loyalty but in a deep respect for Bronfman’s capabilities as a leader and strategist. “Yes, he’s been a friend for decades, but he’s savvy and dedicated and decent as well as an accomplished manager — it will be in good hands if he gets it,” Diller remarked when speaking to the NYT. But beyond personal attributes, Bronfman’s track record offers a compelling argument for his bid to take over Paramount.

Bronfman’s experience with Warner Music Group (WMG) is particularly instructive. As per the information in the NYT report, in 2003, he led an investor group to acquire WMG for approximately $2.6 billion, a move that many initially questioned given the music industry’s struggles in the face of digital disruption. However, under Bronfman’s leadership, WMG underwent a remarkable transformation. He recognized early on that the future of music lay in digital platforms and guided the company through a comprehensive restructuring to capitalize on this shift.

One of Bronfman’s most notable achievements during his tenure was the transformation of Atlantic Records, a WMG subsidiary, into the first major record label to generate more than half its sales from digital products, the NYT report explained.  This milestone was not just a financial success; it marked a significant turning point in the music industry, demonstrating that legacy companies could adapt to—and thrive in—the digital age. The report added that by the time Bronfman sold WMG in 2011 for $3.3 billion, the company was not only more valuable than when he acquired it but also positioned at the forefront of the digital revolution.

Bronfman sees similarities between the challenges that faced WMG and those currently facing Paramount, according to individuals familiar with his thinking, as was reported by the NYT. Just as the music industry was disrupted by digital technologies, the film and television industries are undergoing seismic changes driven by streaming platforms, shifting consumer behaviors, and new competitors. Paramount, with its rich legacy but recent struggles to compete in the streaming-dominated landscape, is in a situation not unlike WMG’s at the start of the 21st century.

Bronfman’s strategy for Paramount likely involves a similar approach to the one he employed at WMG: embracing the digital transformation, streamlining operations, and leveraging the company’s storied brand to attract and retain talent, the NYT report noted. His ability to navigate complex industry shifts and deliver results in challenging environments is a key asset as he pitches his vision to Paramount’s board and shareholders.

However, Bronfman’s bid is about more than just strategy and experience; it’s also about trust and relationships, particularly with Shari Redstone, Paramount’s controlling shareholder. Redstone, who inherited the media empire assembled by her father, Sumner Redstone, faces a difficult decision: whether to entrust the future of her family’s legacy to Bronfman, the NYT report said.

For Bronfman, winning Redstone’s trust is critical. His ability to articulate a compelling vision for Paramount’s future will be essential, but so too will his ability to demonstrate that he can safeguard and grow the legacy that the Redstone family has built, according to the NYT report. This challenge is not just about business; it’s about convincing Redstone that Bronfman is the right person to continue her father’s work and guide Paramount through the next phase of its evolution.

Bronfman’s past experience with family businesses adds another layer of complexity to this dynamic. His earlier efforts to expand the Seagram Company, the Bronfman family’s liquor empire, into the media industry were met with mixed results, culminating in the ill-fated merger with Vivendi. While he has since rehabilitated his career and reputation, the question remains whether Redstone will view him as a safe pair of hands or a risky bet.

Since selling WMG, Bronfman has kept a relatively low profile, focusing on ventures such as Waverley Capital, a venture firm he co-founded, and serving as executive chairman of Fubo, a streaming television service, the NYT reported, This phase of his career has been marked by a more cautious approach, perhaps reflecting the lessons learned from his earlier experiences. Yet, despite this lower profile, Bronfman’s ambition to return to the forefront of the media industry has never waned.

The bid for Paramount represents Bronfman’s opportunity to reassert himself as a major player in Hollywood and to prove that his earlier successes were not just a fluke but the result of a deep understanding of the media landscape and a capacity for visionary leadership.