A MESSAGE FROM OUR SPONSOR

Houndstooth House started as a shared vision between two friends – now it’s been named a Small Business of the Year. Over the past 20 years, founders Denise Cotter and Michelle Marino have grown their two-woman design firm into a thriving business with a 10,000-square-foot showroom and eight employees. At U.S. Bank, we know that bold growth starts with meaningful support. That’s why we support over 1.1 million small businesses with personalized resources and expert guidance. For visionaries like Denise and Michelle, we’re more than a bank – we’re a partner in progress.

And now, a quick update on the latest theater of the streaming wars from my brilliant partner Julia Alexander…

And now, Shari…

It’s been almost a year since the Ellisons and RedBird Capital struck a deal to merge Skydance Media into Paramount Global, while simultaneously recapitalizing the company and keeping it publicly traded under their control. Any deal where a broadcast license changes hands—in this case, CBS’s—can take a while to receive the necessary regulatory approvals. When GE sold NBCUniversal to Comcast more than a decade ago, some 14 months passed between signing and closing. So, the ticking clock of 11 months and counting shouldn’t be that much cause for concern. But we all know there’s nothing remotely normal about what’s going on between Trump, his regulators at the F.C.C., and the pending approval of the Paramount deal. The current hurdle facing Shari Redstone, who controls Paramount Global through her family’s ownership of National Amusements, is figuring out how to settle Trump’s flimsy 60 Minutes lawsuit without making it look like a bribe, or getting the Paramount board of directors—three of whom are newly appointed—into a whole heap of legal trouble, so that F.C.C. chairman Brendan Carr can then begin the process of reviewing the Paramount Global recapitalization. As The Wall Street Journal has reported, Shari offered Trump $15 million to settle the lawsuit; he wants $25 million (plus another $25 million in TV ad time for his pet causes, according to a recent post by our friend Rich Greenfield, at LightShed Partners), and a formal apology. In any event, the settlement discussions, from which Shari has supposedly recused herself, are being led by a mediator. My friend Lesley Stahl likely spoke for many of her colleagues when she told David Remnick recently on The New Yorker Radio Hour that Trump’s lawsuit was “frivolous,” and that “what is really behind it, in a nutshell, is [an effort] to chill us.” As this ridiculous and embarrassing charade drags on, Shari will start to face serious issues of her own making. As you remember, National Amusements owns nearly 80 percent of the voting shares in Paramount Global, but only around 10 percent of the economic interest in the company. This dual-class corporate governance structure gives Shari absolute control of Paramount, which is why Ellison/RedBird has agreed to buy National Amusements in the first place—to take over Paramount without having to buy the whole company, while also merging in Skydance and recapitalizing it all with a multibillion-dollar cash infusion. As part of the deal with the Ellisons and RedBird, Shari and her family will receive around $2.4 billion, in cash, for National Amusements. As best as I can tell, Shari would then need to pay off the creditors at National Amusements, and distribute what’s left to herself and her children. Some reports estimate she will walk away with at least $530 million. For their troubles, the suitors have negotiated a $400 million breakup fee if the deal falls apart, depending on the reason.

A MESSAGE FROM OUR SPONSOR

Behind every thriving local business is a story worth telling. For Houndstooth House, that story begins with Sioux Falls entrepreneurs Denise Cotter and Michelle Marino – and a partnership with U.S. Bank. What started as a shared vision for a flexible, family-first design studio has grown into an award-winning business with a 10,000-square-foot retail space, an eight-person team. Now named a Small Business of the Year, their journey is proof that heart and hard work go hand in hand. U.S. Bank is proud to be a part of their story – and over 1.1 million others like it.

The deadline for the merger to close was originally April 7, but it was extended 90 days, until July 7. A second—and final—90-day extension would bring the deadline for closing to around October 7, as best as can be determined. (It’s not clear whether the deal deadline could be extended further if F.C.C. approval is the only remaining hang-up.) But for the sake of argument, let’s assume the final drop-dead date for the deal is October 7. What happens if there is no F.C.C. approval by then—an increasingly possible scenario, given the apparent stalemate between CBS News, Shari, and Trump—and the deal terminates?

For starters, if that is what happens, neither side would owe the other the $400 million breakup fee, according to Greenfield. So that’s some good news for Shari. But without the money from the deal closing, Redstone will need to come up with, as soon as October, some $550 million in payments to her two big creditors: Larry Ellison, to whom she owes $300 million after he agreed last year to pay off a bunch of National Amusements’ other creditors, including Wells Fargo; and banker Byron Trott, who also happens to be Shari’s M&A advisor on the Paramount Global deal. (Interestingly, Trott just added veteran P.R. executive Brooke Jaye to his team.) You will recall that when Shari was last in need of cash at the National Amusements level, she turned to Trott and his firm, BDT & MSD Partners, which invested $175 million, in two tranches, in the form of a PIK preferred, accreting at 7.75 percent per year. I’m told Shari will owe Trott and crew $250 million or thereabouts by October. (Sara Evans, a spokesperson for BDT & MSD, did not respond to my request for comment.) If Shari et al. don’t get their $2.4 billion in cash, she may not be able to pay off Ellison and Trott. Then what? She could begin liquidating National Amusements and its 75 or so movie theaters, but that won’t get her very far—certainly nowhere close to $550 million. (Molly Morse, Shari’s spokesman at Kekst CNC, declined to comment.) At that point, bankruptcy would be an option for National Amusements. If that were to happen—and it’s not crazy to think it might—a feeding frenzy could break out among those looking to get control of Paramount Global by buying National Amusements out of bankruptcy. Of course, given that Larry Ellison is the largest creditor of National Amusements and obviously wants to control Paramount Global, I would put my money yet again on the Ellison family getting control of Paramount Global by buying the holdco’s stake out of bankruptcy for a huge discount on the $2.4 billion they had previously agreed to pay. I am not the only one to wonder about this possibility. Greenfield, who was once more bullish on the deal closing, wrote this week that he is “increasingly concerned the deal could collapse as Paramount is paralyzed by legal fears.” He added that his team is “hearing National Amusements is headed for bankruptcy if the Skydance deal fails to close.” Could Ellison win National Amusements with a credit bid of $300 million, which is essentially what Shari already owes him? Or would a new bidding war break out to prevent Ellison from picking up Paramount Global that cheaply? National Amusements’ 10 percent economic stake alone is valued around $850 million these days. But gaining control of Paramount through the voting shares would obviously command a premium over the straight economic value. (If there were other real bidders for Paramount Global, they would’ve come out of the woodwork by now, and they haven’t. But at a price less than $2.4 billion, they might. Hello, Apollo.) And what would happen to the $250 million owed to Trott? I suppose it could be folded into the ownership equation at Paramount Global, too, in a bankruptcy scenario, if they were willing to go that route. They might not have much choice if they want any hope of getting repaid. Better to be part of the post-recap equity of Paramount than hope for a recovery in a National Amusements bankruptcy. Regardless, as the clock continues to tick on the mediation with Trump and the F.C.C. approval, there are likely to be genuine unanticipated consequences for Shari—one possible result being that she loses the family’s stake in Paramount Global for the $550 million she owes her creditors. You may have thought this thing was over, or inching toward some awkward resolution. But it doesn’t seem to be, not by a long shot.

Need help? Review our FAQ page or contact us for assistance. For brand partnerships, email ads@puck.news. You received this email because you signed up to receive emails from Puck, or as part of your Puck account associated with . To stop receiving this newsletter and/or manage all your email preferences, click here.

Puck is published by Heat Media LLC. 107 Greenwich St, New York, NY 10006