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Skydance Offers Paramount a Merger Sweetener: A $3 Billion Cash Infusion

With the fate of Paramount hanging in the balance, its leading suitor has just upped the ante.

Skydance, which has been in talks to merge with Paramount for months, in recent days offered to provide the combined company with a $3 billion cash infusion that it can use to pay down debt and buy back stock, according to two people with knowledge of the proposal. Skydance also offered to give Paramount shareholders a larger stake in the combined company than it had initially proposed.

The revised bid is aimed at assuaging investors who have come out against the deal in recent weeks, saying it would enrich Shari Redstone, Paramount’s controlling shareholder, at the expense of other investors.

The vociferous pushback by investors, combined with the complicated nature of the transaction, means the Skydance deal could still fall apart, people familiar with the process said. Paramount’s special committee has discussed conditioning the deal on approval by a vote of a majority of minority shareholders.

Paramount has been in deal discussions with the movie studio Skydance for months, after Ms. Redstone decided late last year to consider a sale for her media empire. Since then, the company has entertained interest from suitors including Apollo, the private-equity giant, and Skydance, which is proposing a merger.

Skydance is proposing to buy Paramount shareholders’ stock at a premium in hopes of further placating investors, one of the people said. Ms. Redstone was already set to get a premium for her shares, because of her controlling stake. Under one option under discussion, Skydance could ask Ms. Redstone take less cash as part of the deal and keep more of her equity in Paramount.

The terms of the new deal would provide Paramount shareholders with a $3 billion investment from RedBird, one of Skydance’s biggest backers, and the family of David Ellison, Skydance’s chief executive and a son of Larry Ellison, the founder of Oracle. Skydance, a media company founded by the younger Mr. Ellison, already has a relationship with Paramount, having helped produce hits like “Top Gun: Maverick” and “Mission Impossible: Dead Reckoning.”

Paramount declined to comment.

The negotiations will now most likely focus on how that infusion should be used. The special committee of Paramount’s board negotiating the deal, which has been focused on getting the best deal for all shareholders, would prefer to use most of that cash to offer incentives to shareholders, such as buying back their shares at a favorable price. Skydance would prefer that the bulk of that cash infusion be used to pay down debt, to put the combined company on firmer financial footing. The company’s significant debt load was recently downgraded, and both companies are focused on ensuring the strength of its balance sheet.

Skydance’s sweetened offerer comes at a delicate point in the negotiations. A deadline is looming for Skydance to negotiate with Paramount exclusively, putting pressure on Skydance to make its best case to merge with the company. Paramount’s special committee pushed for better terms last week, and Skydance responded over the weekend.

In response, Skydance made an effort to meet all of the demands of Paramount’s special committee, but there is still some daylight between the two companies.

Paramount is dealing with turmoil in its top ranks. The relationship between Ms. Redstone and Bob Bakish, Paramount’s chief executive, has soured, and he is expected to resign this week. Paramount has contemplated replacing Mr. Bakish with an “office of the C.E.O.” run by three division chiefs: Brian Robbins, the head of Paramount’s movie studio; George Cheeks, the chief executive of CBS; and Chris McCarthy, president of Paramount’s entertainment and youth brands.

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