Skydance extends final offer to Paramount as merger talks stick on a possible shareholder vote

• Paramount Global is replacing Chief Executive Officer Bob Bakish with a cohort of existing division heads.
• The Skydance consortium has proposed a deal with new terms to the Paramount special committee as a "best and final" offer, according to people familiar with the matter.
• A potential dealbreaker is whether to hold a so-called "majority of the minority" vote on the deal, which would allow common shareholders the chance to potentially sway the outcome.

In what could easily be a plotline from HBO's hit show "Succession," Paramount Global is replacing Chief Executive Officer Bob Bakish with a cohort of existing division heads, the company announced Monday. It's a chessboard-altering move designed to accelerate the company's future — one way or another, according to people familiar with the matter.

Paramount announced Bakish's departure before reporting first-quarter earnings. He'll be replaced by a trio of executives in what the company is calling the "Office of the CEO."

The decision to remove Bakish as CEO comes as Paramount Global closes in on a merger agreement with Skydance Media. His departure throws into question Paramount's near-term future as a standalone company, which could help force through a merger agreement.

The Skydance consortium, which includes private equity firms KKR and RedBird Capital, has proposed a deal with new terms to the Paramount special committee as a "best and final" offer, according to people familiar with the matter. Skydance is waiting to hear back from the special committee on whether it will accept the offer, said the people, who asked not to be named because the discussions are private.

As part of the new deal on the table, controlling shareholder Shari Redstone may take less than $2 billion for her controlling stake in Paramount — lower than what Skydance had initially offered her. The Skydance consortium is contributing additional capital to pay common, Class B shareholders at a nearly 30% premium to the undisturbed trading price of about $11 per share, according to people familiar with the new deal. In total, Redstone and Skydance would contribute $3 billion, with the vast majority going to Class B shareholders, the people said.

Skydance's valuation as part of the deal remains around $5 billion, the people said.

Majority of the minority

A number of large common shareholders, including Gamco Investors, Ariel Investments, Matrix and Aspen Sky Trust have publicly criticized the deal, arguing it destroys value for common shareholders.

A potential dealbreaker is whether to hold a so-called "majority of the minority" vote on the deal, which would allow common shareholders the chance to potentially sway the outcome. The special committee tasked with evaluating the offer would also be the party to put the deal up for such a vote.

Skydance believes it has met all of the conditions from the special committee and is prepared to walk from the deal if such a vote is mandated given the improvements it has made as of Monday, sources tell CNBC. Adding a vote post-negotiation is a non-starter, one of the people said.

Forcing such a vote now would change the structure of the deal for Skydance, which is already paying a significant premium to Redstone for her controlling stake and paying Class B shareholders, said two of the people familiar with the Skydance consortium's thinking.

Spokespeople for Skydance and Paramount Global's special committee declined to comment. A spokesperson for National Amusements, which houses Redstone's stake, said the decision on whether to take the deal lies with the Paramount Global special committee.

"National Amusements specifically requested that the Paramount board form a special committee to exercise their dependent judgment in considering a potential transaction with Skydance," a National Amusements spokesperson said in a statement provided to CNBC. "National Amusements has no role on the committee, and we respect the committee's process and ultimate decision on whether the Skydance deal presents an attractive transaction for Paramount and whether they want to continue to move forward."

Paramount Global shares jumped about 3% during regular trading Monday.

Status quo in chaos

By removing Bakish, Redstone and the Paramount Global board are now throwing the status quo into chaos. The company will no longer have a singular leader or a clear go-forward strategy. Redstone may be trying to force common holders to choose a sale by effectively destabilizing the company without one.

Exclusivity talks with Skydance are set to end May 3. CNBC reported Thursday that Skydance was inching toward valuation terms but wanted a two-week extension on exclusivity, which now may be moot with its latest best and final offer.

A joint bid by private equity firm Apollo Global and Sony could serve as a white knight if the special committee votes down the Skydance deal. The New York Times reported earlier in April that the two parties have had preliminary talks on a deal. Still, it's unclear if Redstone would consider selling to a large private equity firm, which would likely break up the company over time. Redstone chose to ignore Apollo's earlier offer in favor of negotiating with Skydance.

Meanwhile, Paramount has an important carriage renewal deal with U.S. cable company Charter Communications in the coming days, though the deadline could be extended. Bakish has been deep in negotiations with Charter. It's unclear how his removal will affect those negotiations, which will play a large role in valuing the company moving forward.