Welcome back to Dry Powder. I’m Bill Cohan.

Now that Skydance has ostensibly won the Paramount bake-off (what a wild ride it’s been!), a comprehensive look at how the deal came together and what happens next, with some thoughts from RedBird’s Gerry Cardinale, himself: the David Ellison hosannas emanating from his partners, the Zucker angle, Shari’s indemnity, some interesting tidbits about her payday gleaned from S.E.C. filings, and why Gerry is “not really in a celebratory mood, to be honest with you.”

But first… A few updates from my partners at Puck…

• Christie’s Toulouse-Lautrec for Paris in October: Last winter, Christie’s tried to send a bullish signal to the art market by releasing its $30 million Brice Marden months before the May sales. The painting ended up being withdrawn, but the sales were otherwise successful. This week, four months ahead of Art Basel Paris, the auction house has sent a similar signal about its October sales. On October 18, Christie’s will offer a preparatory sketch of Henri de Toulouse-Lautrec’s famous 1892 lithograph, a symbol of Parisian café society, Divan Japonais, which is part of The Met’s collection though currently not on view. The sketch, which is being promoted as a major rediscovery, has not been seen in public for nearly a century. Estimated at $2.7 million, Jane Avril au Divan Japonais, also from 1892, is a reason to keep a close eye on those Paris sales. —Marion Maneker (Sign up here for Wall Power)
• More Ozy fireworks: The Carlos Watson trial, now in its seventh week, is getting juicer by the day. On top of Watson offering confusing explanations on the witness stand for the infamous 2021 incident in which his deputy, Samir Rao, impersonated a YouTube executive on a call with Goldman Sachs, he illicitly snuck a cellphone into the New York federal courthouse by telling security that he was a lawyer who was authorized to have it. District Judge Eric Komitee has ordered a briefing on whether prosecutors should be allowed to question Watson about this behavior, which comes on the heels of Watson attorney Shannon Frison sending an angry letter over the weekend accusing the judge of bias. According to Frison, Komitee has been siding with the prosecution, sustaining his own objections, and openly questioning the defense team’s candor. —Eriq Gardner (Sign up here for What I’m Hearing+)

Not surprisingly, I have a few observations about the revelations surrounding the deal announcement. First and foremost, the sale of National Amusements and Paramount Global from the Redstones to the Ellisons and RedBird Capital is a tale of two wealthy families. As I’ve written before, the relationship between the two clans goes back to when an ailing Sumner Redstone spent some time at one of Larry Ellison’s beachfront homes in Malibu in 2015. Manuela Herzer, a former girlfriend and one of two women Sumner was living with around that time, arranged to move the feeble Redstone into Ellison’s house while his mansion in Beverly Park was being fumigated for termites so he wouldn’t be exposed to any harmful chemicals, and so he could enjoy the cool sea breezes. “Sumner loves the ocean in the summer,” Herzer told me at the time.

Larry Ellison, with a net worth these days of $160 billion, is now buying his late friend’s company and will become its largest shareholder. Of the $8 billion of new money being invested in the deal, $6 billion is coming from Larry. This is something many of us always suspected—after all, Larry’s son David has built a nice business in Skydance Media, but is probably a bit short of $6 billion in liquidity. So Larry, with infinite resources, is stepping up on his son’s behalf. (As a father of two sons, myself, I find this rather charming, to be honest.) “It’s a huge commitment,” Gerry Cardinale, the founder of RedBird Capital, told me on Tuesday.

And it stands in sharp contrast to the way Sumner treated Shari. Sumner, after all, never wanted his daughter to be involved with either CBS or Viacom, the predecessor companies that formed Paramount Global under Shari’s ownership. But she defied him, ultimately taking control of the two entities as his health deteriorated and eventually merging them into a single, less valuable conglomerate—again, against Sumner’s wishes. So the deal is an ironic tale of two families, one of a father who is clearly supporting a child; the other where the father clearly did not. I’m sure Larry is hoping that David’s stewardship will lead to a very different trajectory. But this is a man with plenty of walking-around money. It won’t change his life one iota if his $6 billion goes up in smoke. (According to Bloomberg, Larry’s net worth has increased $37 billion so far this year, making him the seventh-richest person in the world.)

The outcome of the deal is far more material to Cardinale’s RedBird Capital, which is contributing the other $2 billion, making it the firm’s largest investment to date. RedBird isn’t going to be in the money here until the Paramount stock, which will remain publicly traded, reaches at least $16 per share, or 37 percent higher than where the stock is trading now. (Notably absent from the investment pool, as my partner Matt Belloni noted in his chat with Gerry on The Town, his excellent podcast, is KKR, one of the original investors in Skydance.)

Second, this is a story about the vicissitudes of dealmaking. Another surprising tidbit that came out of the press release and the S.E.C. filings concerns the deal that Ellison/RedBird cut with Shari to buy NAI. In the end, she and her family get $1.75 billion in cash, which is $1 billion more, or a 133 percent premium, to what her 10 percent economic interest in Paramount Global is worth in the market (roughly $750 million). I had thought she was holding out for more, something in the $2 billion range. In fact, I thought her desire to cross that threshold was the reason why she walked away from the deal on June 11. Sure, she ended up getting $50 million more in a sweetened offer, but it’s still far less than what several of her late-appearing suitors, such as Barry Diller and Edgar Bronfman Jr., supposedly offered her on a preliminary basis.

The problem, Gerry said, was that Shari thought Ellison/RedBird had “retraded” the deal for NAI when it was probably more of a “miscommunication” about what was being offered for NAI, and how Ellison/RedBird had to offer some consideration for the non-Redstone shareholders in Paramount. But after Shari blew up the deal on June 11, the two sides kept talking. “David did a good job with her,” Gerry said. “David did a good job sort of keeping the channels open with her side. And all the advisors jumped in. And so it was more of a slow drip of reengaging.”

In any event, the 133 percent premium she’s getting for her class A shares in Paramount is larger than what’s being given to her fellow shareholders. Other voting shareholders are getting $23 a share, a 28 percent premium, while the B shareholders, who don’t vote, are getting $15 a share, a 48 percent premium. And that doesn’t take into account that many of the shareholders will end up with something closer to $7.50 a share in cash, plus stock in the so-called New Paramount. I’m waiting for the flood of shareholder lawsuits that will no doubt argue that Shari’s premium is unfair, on a relative basis.

Though the word “indemnity” does not show up in any of the S.E.C. filings, there is some sort of indemnity from Ellison/RedBird to protect Shari’s $1.75 billion payout. But since there won’t be a shareholder vote to approve the deal, we may never know how much protection Ellison/Cardinale is giving Shari from shareholder lawsuits. Gerry declined to specify the amount other than that it is “real money” and that Ellison/Cardinale is “stepping up to cover her first dollar up to a certain amount.”

The largest non-Redstone holder of the A shares, Mario Gabelli, has threatened to file a lawsuit—or did, anyway, before the deal was announced. It’s not clear whether he’ll follow through on that threat, or support the deal by holding on to his stock to see what Ellison/RedBird can pull off. His only tweet about it on Monday was enigmatic, something about disclosing the price paid to NAI for the voting and nonvoting shares. “Call it our ‘operation fishbowl,’” he wrote, whatever that means. Anyway, shareholder lawsuits are sure to follow, just as little boys on sleds follow a winter snowfall.

Third, I was surprised by the extent of the liabilities that exist at the Redstone family holding company. We know about the $175 million PIK preferred owed to Byron Trott’s BDT & MSD Partners—Shari’s financial advisor on the deal—and we know about the roughly $200 million in bank debt owed to Wells Fargo. (I had always thought the Wells Fargo debt was more, but was advised that it was closer to $200 million.) But, it turns out, Ellison/RedBird is paying Shari $2.4 billion for NAI, netting her the aforementioned $1.75 billion in cash for her equity. That means the liabilities at NAI are in the $650 million range, not the $375 million range, as previously thought.

What the heck are those other $275 million in liabilities? “There was a lot more working capital” tied up at the NAI level than previously thought, Gerry told me in our chat. And don’t forget that in addition to getting Shari’s shares in Paramount Global, Ellison/RedBird also got Redstone’s original movie theater business. Not exactly what you want to own right now, so look for that business to hit the deck as soon as the deal closes, which is expected to happen by September 2025 after a thorough examination by regulators. (After all, a broadcast network, CBS, is being conveyed. The last time that happened—NBC to Comcast, from GE—the approval process took 14 months.) “There’s only two theater exhibitors,” Gerry said, “And so I would imagine we’ll cut a deal with one of them.”

Cardinale, a former Oxford crew jock, was notably silent on the conference call announcing the deal. He had lived the deal nearly every day for the past six months, riding the dragon up and down. And yet he stayed in the background on the day the deal was finally announced. “I just want to calm this thing down,” he told me, when I asked about this unusually modest behavior. “And I want to make it more about David and my partner, Andy [Gordon], who was a 35-year banker at Goldman, and really we played sort of a dual role here. We were sort of the banker-advisor and really helped drive the deal—and obviously, we were the investor. But I just thought, No one wants to hear from us. People want to hear from Ellison, because the story here is tech merging with Hollywood, and how you will own these assets going forward.” (Cardinale and Ellison were interviewed by David Faber on CNBC today.)

Also noticeably absent from the investor call was Jeff Zucker, the former head of NBC and CNN who is in the RedBird stable through his position running the RedBird IMI investment fund. Gerry and I talked about what Zucker’s role would be at CBS, if any, once the deal closes. He reminded me that it’s not as simple as just moving Zucker from RedBird IMI to CBS. “He’s a fiduciary for over a billion dollars of deployed capital with the IMI sleeve that I have,” Gerry said. “It’s not so straightforward that he just walks away from that to go do this.” But he acknowledged that many people think Zucker would be the perfect person to run CBS after the deal closes, “and he may be,” Gerry said, “but I have a year to think about it.”

Gerry and I also discussed what it will mean to marry technology and Hollywood for the first time, as the Ellison/RedBird clan is promising to do. He said that Netflix, of course, was the gold standard in Hollywood these days for the marriage of content and technology. “But I think you can do a lot better than Netflix,” he said. He cited what Ellison has done at Skydance on the animation side with the “studio in the cloud.” He said he believes the New Paramount can do more with recommendation algorithms, which help people decide what to watch, and that A.I. will make the whole production of content more efficient. “We should be able to make movies for half the cost,” Gerry predicted. “We should be able to make original content for half the cost.” (Nicolas Cage would like a word…)

Gerry also said he welcomes the 45-day “go-shop” provision in the contract. Could Barry Diller sweeten his offer in order to get control of Paramount, a prize he lost out on 30 years ago? Could Steven Paul, a Hollywood producer who is willing to pay top dollar for NAI, or Bronfman and Bain, come over the top? (At a recent Nantucket dinner party, I ran into a Bronfman scion who told me that his father is gearing up now that the 45-day clock has started ticking, but I’m skeptical of any of Paul, Diller, or Bronfman winding up with NAI. Larry’s money trumps all.) Gerry said he isn’t worried. “Competition is a great thing,” he said. “Honestly, if somebody wants to come in and outbid us on this thing with no diligence and everything else, and they say they want to go for that, then go for it. I’ll take my breakup fee”—pegged at $400 million—“and I’ll go home and we’ll do something else.”

In the meantime, Gerry told me, he still needs to take a look at the analysis the bankers prepared for him on why the Paramount stock price traded down on Monday. (It’s been up a bit since then.) He and his team also have to work on putting together a proxy statement, which among other things will detail the six months of negotiations that led to the deal, as part of the $4.5 billion tender offer that Ellison/RedBird are undertaking to buy-in a chunk of the A and B shares. (Maybe the proxy statement will share more detail on Shari’s indemnity.)

He’s just starting to let it all sink in. “It’s going to be a roller coaster,” he said, “but when you step back, I think it’ll have tremendous implications for how these assets can be owned.” He believes the company can be run better, that the assets can be used to produce more content and more cash flow, and that shareholders would be wise to bet on him and his team. “My career is about buying great intellectual property and great intellectual property-based assets and transforming them, reinvigorating them, finding new modes of distribution, like we did with the regional sports network model,” he said. “I look at Paramount the same way. It’s very familiar territory to me.”

One thing he is not doing is celebrating, at least not yet. He and his team were supposed to have a celebratory closing dinner on Monday night. But they decided to pass on it for now. “Everyone was so tired,” he said. “We’ve been in the office until four in the morning.” Is he shell-shocked, I wondered, now that he’s like the dog that caught the car? “I’m sober about it,” he said. “I’m daunted by the fact that it’s not about quote unquote, winning the deal. It’s about owning the deal well. And that’s daunting to me. And so I’m not really in a celebratory mood, to be honest with you. I’ve done this long enough, and I have a tremendous amount of realism around how hard this is going to be. If anything, I have more butterflies in my stomach. It’s like at the beginning of a crew race, where you’re sitting there and you’re waiting for the gun to go off.”