Is It Good to Go Exclusive?

Paramount’s proposed merger with Skydance has been the most tumultuous media deal in years. Now it has taken yet another turn after the exclusivity period for negotiations expired without an agreement in hand.

A month ago, a special committee of Paramount’s board agreed to enter into exclusive talks with Skydance — a Hollywood studio run by the tech scion David Ellison — even as the private equity giant Apollo Global Management reached out with a $26 billion offer. Paramount shareholders grumbled that granting exclusivity was a mistake, and that the company should have engaged with Apollo instead.

This week, the special committee told Skydance that it was letting the exclusivity period lapse. The end of exclusivity doesn’t alone kill the deal with Skydance. But it does allow Paramount to open up negotiations with Apollo and Sony Pictures Entertainment, which joined Apollo’s bid.

The so far fruitless negotiations raise a question that deal makers have long debated: Why do companies like Paramount agree to exclusivity in the first place?

Buyers often prefer exclusivity more than sellers. Exclusivity is a sign from the seller that it is committed to doing a deal and not just using a bid to drum up higher offers.

Sellers generally prefer to negotiate without exclusivity because it limits their ability to shop around for a higher price. And since they’ve already signaled to a buyer they’re willing to make a deal, they’ve weakened their bargaining power.

Many big public company deals are negotiated without exclusivity, since shareholders expect the company to get the highest possible price.

Exclusivity can help sellers with thorny deals. In addition to helping to cajole a potential buyer to spend millions on due diligence, committing to negotiate with just one party can obscure limited interest.

“An auction is a really good way of selling something when you have multiple bidders,” Edward Rock, a professor of corporate law at New York University told DealBook. “It’s a really bad way of selling something if you announce an auction and only one person shows up, because now everybody knows there’s no one else out there interested in buying the company.”

For Paramount, other factors were most likely in play. Shari Redstone, the company’s board chair, almost certainly prefers a Skydance deal, which would allow her to sell her shares at a control premium. It’s unclear whether the all-cash Paramount offer from Sony and Apollo would be as lucrative for her.

Redstone appointed the special committee to lead Paramount’s negotiations to avoid conflicts of interest. But that committee is nonetheless aware that Skydance’s bid for National Amusements, the parent company of Paramount, was supported by Redstone, the company’s most influential shareholder. That was likely a factor in its decision to move forward with exclusive talks, said Steven Davidoff Solomon, a professor at the University of California, Berkeley, School of Law.

Solomon said the special committee might have seen Skydance’s offer as the only plausible deal on the table. “Let’s see if we can get it done,” Solomon said, articulating his interpretation of the committee’s approach. “If we can’t get it done, then 30 days later, we can go do another deal.”

But time is money. The highly publicized 30-day deadline put a spotlight on the deal, adding an unwelcome level of dramatic tension as the two sides sought to hammer out a tricky agreement. The 30 days also coincided with the departure of Paramount’s C.E.O., Bob Bakish, which left the company on shakier footing and potentially weakened its bargaining power.

If Paramount begins talks with Sony and Apollo, it’s not clear they will result in a deal. It’s not clear whether there will now be any deal at all. But in any case, Paramount’s special committee will have a lot to talk about when it meets today to discuss its options. — Lauren Hirsch

IN CASE YOU MISSED IT

The United States added fewer jobs than expected last month. Non-farm payrolls released this week showed that 175,000 jobs were created, fewer than forecast, and that wage growth slowed. The data capped a week of new economic indicators and the Fed’s decision to leave rates unchanged until it is confident that inflation is closer to its 2 percent target.

The Securities and Exchange Commission charged Trump Media’s auditor with fraud. The regulator charged BF Borgers with failing to comply with accounting rules, and the firm agreed to stop filing audited statements on behalf of clients. Trump Media has been a client of BF Borgers since 2022.

The Biden administration recommended reclassifying marijuana. Cannabis company stocks jumped on news that the Justice Department recommended changing the drug’s classification from Schedule I (the same level as heroin) to Schedule III (which would put it on a par with Tylenol and codeine). The move could help President Biden’s appeal among younger voters.

Another crypto mogul was sentenced to prison. Changpeng Zhao, the founder of Binance and one of the industry’s biggest names, was given a term of four months for money laundering. Zhao, who pleaded guilty last year, received less than the three-year term that prosecutors had recommended. With a fortune estimated at $33 billion, he may become the richest federal inmate in U.S. history.

Munger’s best zingers

Much of Berkshire Hathaway’s annual meeting in Omaha today will resemble gatherings of years past: the tens of thousands of attendees from around the world; dozens of representatives from the conglomerate’s portfolio companies, from Fruit of the Loom to the BNSF railroad; and Warren Buffett himself on hand to answer shareholder questions.

But this year Buffett will be without his longtime right-hand man, Charlie Munger, who died in November at age 99. For ages, the centerpiece of the shareholder conclave was an hourslong question-and-answer session featuring the two men, who perfected a buddy-comedy act — Buffett first answered with sunny optimism, and then Munger followed with sharp-tongued cynicism. (This year, Buffett will be joined by his top lieutenants, Greg Abel and Ajit Jain.)

Here are some of the best zingers that Munger let fly at Berkshire annual meetings over the years:

• “If you mix the mathematics of the chain letter or the Ponzi scheme with some legitimate development like the development of the internet, you are mixing something which is wretched or irrational or has bad consequences with something that has very good consequences. But you know, if you mix raisins with turds, they’re still turds.” (2000)

• “What I needed to get ahead was to compete against idiots. And luckily there’s a large supply.” (2014)

• “I have avoided compensation consultants all my life. I hardly can find the words to express my contempt.” (2017)

• “A man who jumps out of a building is OK until he hits the ground.” (2023, on government deficits)

On our radar: A.I. art that gives humans some hope

Ever since ChatGPT was released in 2022, businesses and governments have been trying to figure out how artificial intelligence will work alongside humans. Can the technology take on entire jobs? Is it a collaborator? And which functions could A.I. augment rather than replace?

For clues on the future, DealBook visited two art galleries in London featuring works created by traditional artists experimenting with A.I.

In “AI & Technology Influence on Contemporary Art,” a show curated by Virginia Damtsa and on display through Sept. 10 at Gabriel Scott, three painters have used the tech to test the boundaries of human creativity, exploring whether A.I. is a liberating tool or an existential risk to creativity. Jonathan Yeo — whose painting of King Charles III, the first since he was crowned, will be unveiled this month — asked an A.I. to create a series of self-portraits. Von Wolfe, an oil painter, built his own A.I. to create an image of a digital sculpture that is displayed in a light box. And Henry Hudson asked an A.I. to create an image and then used oils to paint a version of it.

“Post-Photography: The Uncanny Valley,” a show at the Palmer Gallery through May 17, also features the work of three artists. Boris Eldagsen of Germany won a Sony World Photographer Award last year — and turned it down, after revealing that he had used A.I. to create his entry partly to kick-start a discussion about technology and art. The image, “The Electrician,” and other works by Eldagsen are displayed alongside images by Ben Millar Cole, a British photographer, and Nouf Aljowaysir, a Saudi-born artist. It would be impossible for most viewers to know that the images were generated using tools like DALL-E, Midjourney and Stable Diffusion.

The artists created the works by using A.I. as a tool, as if it were a paintbrush or a computer. For workers trying to understand how their own jobs will evolve, that could provide some hope that humans will have a role to play for a bit longer yet.

Thanks for reading! We’ll see you Monday.

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