What you need to know about Skydance's bid for Paramount, from financing a deal worth $32 billion to its plans for the media empire

• Film studio Skydance is vying to buy Shari Redstone's controlling stake in Paramount.
• Its latest bid includes a premium for shareholders and a $3 billion cash injection.

Paramount's CEO Bob Bakish was ousted on Monday night. His exit bodes well for film studio Skydance Media, which is vying to buy Shari Redstone's controlling stake in the entertainment giant.

Skydance Media and its largest private-equity backer RedBird Capital Partners have been wooing Paramount for the better part of a year. The Skydance consortium, including fellow Skydance investor KKR, submitted a revised offer on Sunday. It includes a $3 billion cash injection, most of which would pay off shareholders, and the rest going toward paying off debt, according to two people close to the negotiations.

The pressure is on. There is little wiggle room with this new bid as the consortium has already made significant concessions to meet the demands of the committee in charge of recommending the deal to the board, according to one of the sources. Skydance's exclusive negotiating period ends on May 3. If both parties agree on the broad strokes of the deal, extending this window is an option. However, if it falls through, another bidder is reportedly on deck: private equity titan Apollo.

The deal would be worth roughly $32 billion, according to the source, with the value of Paramount and its $15 billion in debt making up the lion's share. The proposal values Skydance, which would merge with Paramount, at $5 billion.

Paramount did not reply to a request for comment in time for publication. At Tuesday's earnings call, executives took no questions and instead played the "Mission: Impossible" theme on a loop. (Skydance is a co-producer on the Tom Cruise-helmed spy movies).

Here's what we know about the deal, how much Redstone would get, and what a new Paramount would look like.

The money

The Skydance consortium sweetened their bid by offering to buy shares at a premium of nearly 30% from $11 per share, according to the two sources. Paramount stock traded at that amount in mid-April before merger talks boosted the price.

This concession comes after shareholder complaints that the deal left common shareholders in the cold, including from investor Mario Gabelli. Second to Redstone, his funds own the most voting shares. Ex-CEO Bakish had opposed the merger for shareholder dilution, CNBC previously reported.

Heiress Redstone's compensation is still being negotiated, according to one of the sources. Redstone controls Paramount through her family's holding business, National Amusements. That said, she would likely receive less than $2 billion for her controlling stake, a smaller sum than first offered.

The players

Skydance is owned by David Ellison, son of billionaire Oracle founder Larry Ellison. The Santa Monica, California-based studio successfully co-produced the "Top Gun" reboot with Paramount. Skydance has branched into animated features including "Luck" on Apple TV+ and video games.

Aside from the Ellison family, Skydance's largest shareholder is RedBird, a New York City-based private equity firm with $10 billion in assets. RedBird has been an investor in Skydance since 2020, including its most recent round in 2022, which was led by KKR and the Ellisons.

RedBird's founder and chief executive is Gerry Cardinale, a former Goldman Sachs partner who made his name as the banker to the New York Yankees and the NFL. He is known for leveraging intellectual property, whether it's television rights or movie franchises, to create bigger businesses as well as his relationship savvy, according to 27 colleagues who spoke to Business Insider in 2022.

Many of RedBird's business partnerships date back to his Goldman days. Skydance has partnered with the NFL to launch a production arm for scripted and unscripted sports content.

What Paramount would look like after a Skydance merger

Paramount has installed a trio of leaders to replace Bakish in the interim. If the company accepts the bid, David Ellison will be installed as CEO, according to the two sources. Jeff Shell, ex-NBCUniversal CEO and current chairman of sports media at RedBird, would report to Ellison as president.

Under the agreement, the combined company would stay public, two sources close to the negotiation said. The deal would not break up Paramount, which includes broadcaster CBS and cable networks MTV and Nickelodeon.

Restructuring Paramount's balance sheet is one half of the equation, one of the individuals said. Combining Skydance's and Paramount's libraries and studios would benefit both, as shown with the successful "Top Gun" co-production, they said. Skydance already has the rights to produce and finance other films based on Paramount franchises including Transformers.

A new Paramount could also take better advantage of working with streaming services to finance new projects. For instance, Skydance has an Apple TV+ contract. Another RedBird portfolio company, Ben Affleck and Matt Damon's Artists' Equity, has a partnership with Amazon Studios.

Keeping Paramount public sets the Skydance bid apart from Apollo's potential offer, according to one of the sources. Apollo has reportedly partnered with Sony on a potential all-cash $26 billion offer that would take Paramount private. (Apollo did not respond to a request for comment in time for publication.)

There are also questions as to whether Paramount would stay whole under Apollo and Sony. Apollo previously offered $11 billion just for Paramount's movie studio, the Wall Street Journal reported in March. Paramount would have been left with its lower-performing cable channels and struggling streaming service, and the bid went nowhere.

The $26 billion offer is for the entire company, but Sony's Japanese ownership may pose an obstacle to retaining US broadcast stations.

Sony and Apollo have yet to make an official bid. With Skydance's exclusivity window ending soon, they may be waiting in the wings.

Editor's note: KKR is the largest shareholder of Business Insider's parent company Axel Springer.