Skydance Media and Paramount Global have announced their agreement to merge, marking a significant development for one of Hollywood's oldest studios. The merger will proceed in two stages: initially, Skydance and its partners will acquire National Amusements, the entity holding the Redstone family's controlling stake in Paramount, for $2.4 billion in cash. Following this, Skydance will merge with Paramount, offering shareholders $4.5 billion in cash or stock and injecting an additional $1.5 billion into Paramount's financial structure.

This strategic move comes as shares of CBS, owned by Paramount, saw a surge of over 4% pre-market. The deal signifies a pivotal moment for Shari Redstone, whose father, the late Sumner Redstone, transformed the family's drive-in theater business into a media conglomerate that included Paramount Pictures, CBS, Comedy Central, Nickelodeon, and MTV. Redstone, currently the chair of both Paramount and National Amusements, emphasized the need to strengthen Paramount for future challenges while maintaining the primacy of content, a principle her father championed.

The merger will unite Paramount, known for classics like 'Chinatown,' 'The Godfather,' and 'Breakfast at Tiffany's,' with Skydance, its collaborator on recent blockbusters such as 'Top Gun: Maverick' and 'Mission: Impossible-Dead Reckoning.' David Ellison, the 41-year-old founder of Skydance and son of tech mogul Larry Ellison, will assume the roles of chairman and CEO of the newly formed Paramount. Jeff Shell, the former CEO of NBCUniversal, will take on the presidency.

Ellison inherits a company facing numerous challenges in the rapidly changing entertainment landscape due to the rise of streaming services. Paramount has lost nearly $17 billion in value since late 2019, as its traditional TV business declines faster than its Paramount+ streaming service can become profitable. Internal tensions led to the ousting of CEO Bob Bakish in April, who disagreed with Redstone over the Skydance deal. His replacement, a CEO triumvirate, proposed significant cuts and asset sales to revitalize the company.

Ellison plans to integrate top-tier technology and modern infrastructure into Paramount+ and the free streaming service Pluto TV, while enhancing Paramount's traditional TV networks. Skydance's commitment to infusing new technology, leadership, and creative discipline aims to enrich future generations. The deal, which underwent several negotiations and a brief halt on June 11, was ultimately revived with improved terms for the Redstone family and enhanced legal protections against potential shareholder lawsuits.

The final agreement involves an all-stock transaction valuing Skydance at $4.75 billion, resulting in a combined entity with an enterprise value of $28 billion. Investors hope that Skydance's involvement will revitalize Paramount's performance. The transaction offers a significant premium to Paramount's shareholders and includes a 45-day window for Paramount to seek a better offer, leaving the door open for further developments in this complex deal.