Gerry Cardinale’s Vision: Skydance Media’s $8 Billion Bid to Reimagine Paramount

Can the strategic vision of RedBird Capital Partners transform Paramount 's fortunes? Will Skydance 's $8 billion bid withstand the intense scrutiny and competition from rival offers? How does Gerry Cardinale’s focus on intellectual property signal a paradigm shift in media investments? The latest edition of Offmarket Investments by Summit Communication Group explores Cardinale's latest private equity play and the intriguing questions it raises for the future of entertainment. 

Meet Gerry

From Goldman Sachs to RedBird: A Riverc of Deal Flow

When Gerry Cardinale departed from Goldman Sachs in 2012, he misjudged the challenges of launching a private equity firm without the backing of a global financial titan. “At Goldman Sachs , you could press a button and $20 billion would appear,” reflects Cardinale from his office on Madison Avenue. “Starting RedBird was an ‘oops’ moment, like the coyote in a Road Runner cartoon, looking down after running off a cliff.” Nevertheless, Cardinale’s knack for identifying lucrative deals and his connections with wealthy American families enabled him to raise his initial capital. “I raised $100 million from families and entrepreneurs I had made money for and worked with,” he tells the Financial Times.

Over the past decade, the 56-year-old financier has amassed a diverse investment portfolio, spanning Wall Street, Hollywood, sports, and media, by partnering with experienced executives and sourcing unique deals. RedBird Capital Partners now manages $10 billion in assets, with 70% invested in sports, media, and entertainment, and the remainder in insurance and asset management. According to insiders, the firm has delivered a 2.5x gross multiple of capital and a 33% gross internal rate of return to its investors.

Breakfast with Bob

The Moment That Gave a New Shape to RedBird’s Portfolio

In the ever-evolving landscape of Hollywood, intellectual property (IP) is the cornerstone of success. Marvel Entertainment with its Cinematic Universe, a masterstroke by The Walt Disney Company , has transformed decades-old comic book characters into a $30 billion box office titan, epitomising the lucrative potential of IP.

Bob Iger, Disney’s former and current CEO, elucidated this grand IP strategy to Gerry Cardinale of RedBird Capital Partners during a breakfast meeting at the Beverly Hills Peninsula Hotel in 2021. This interaction would prove to be more than a casual conversation, as it laid the groundwork for Cardinale’s foray into the realm of high-stakes media acquisitions.

Cardinale, an astute financier predominantly known in the sports world, was eager to grasp Disney's IP philosophy. He inundated Iger with queries about Disney’s IP, which encompasses Star Wars, Pixar, and an array of iconic characters. Iger was struck by Cardinale’s inquisitiveness and his pre-existing knowledge. "He gets the fact that great IP is the equivalent of beachfront property," Iger remarked, noting Cardinale's understanding of the enduring value of quality entertainment.

The bond forged between Iger and Cardinale went beyond mere professional curiosity. In 2022, during Iger’s hiatus from Disney, RedBird provided him with office space, albeit without a formal role at the firm. Cardinale's evolving thesis on the perpetual value of IP has shaped RedBird's diversified investment portfolio, spanning sports, entertainment, and media. Now, RedBird is backing Skydance ’s $8 billion bid to acquire Paramount , a significant competitor of The Walt Disney Company .

Paramount Global

The Prize in RedBird’s Strategic Expansion

Skydance Media, helmed by David Ellison, is negotiating to buy Shari Redstone’s controlling shares of Paramount , with private equity firm KKR also in the mix. Redstone’s stake, held by National Amusements, a conglomerate founded by her grandfather and expanded by her father, Sumner Redstone, includes CBS , Nickelodeon , MTV Oy and Paramount Television Studios . The proposed deal envisions Skydance acquiring National Amusements and merging with Paramount , with RedBird Capital Partners , KKR and Skydance contributing $1.5 billion to alleviate Paramount ’s debt.

"The acquisition of Paramount by Skydance and RedBird illuminates a new era in entertainment, where strategic IP management drives unprecedented innovation and value creation. This move underscores the pivotal role of intellectual property in shaping the future of media, ensuring that iconic content not only survives but thrives across evolving platforms."

RedBird Capital Partners and its affiliates have been active in acquiring and investing in assets. Recently, RedBird IMI, a new fund established with former CNN chief Jeff Zucker and an Abu Dhabi investment group, agreed to acquire All3Media , the production company behind Fleabag and Squid Game: The Challenge, for $1.5 billion. Additionally, Skydance , one of RedBird’s portfolio companies, is a leading contender to take control of Paramount Global. RedBird-backed Fenway Sports Group , owner of the Boston Red Sox and Liverpool Football Club , was recently approved as an investor by the PGA TOUR . In 2022, RedBird acquired Italian football club AC Milan .

A notable recent endeavour was the attempted acquisition of the The Telegraph (UK) newspaper and The Spectator (UK) magazine. RedBird IMI managed to take control by settling the debts of the Barclay family, thus averting a planned auction by Lloyds Banking Group . This move sparked outrage among rival bidders and scrutiny from UK politicians, who raised concerns about Abu Dhabi's involvement. Culture Secretary Lucy Frazer announced a review due to worries about press freedom. RedBird IMI has been cooperating with UK officials and deploying prominent advisers, including former Chancellor George Osborne, to reach a compromise. Cardinale asserts, “Our job as private equity investors is to grow the value of our businesses, not to influence content or editorial direction.”

In a parallel scenario, private equity giant Apollo Global Management, Inc. and Sony have tabled a $26 billion bid for Paramount , leading to considerable corporate intrigue and media frenzy. Despite the special committee's recent endorsement of the Skydance/RedBird bid, negotiations have encountered obstacles.

Success in this bid would position RedBird Capital Partners as part-owner of a major Hollywood studio, elevating Cardinale to a status akin to Iger, though Cardinale modestly prefers the label "investor." His approach to sports and entertainment is characterised by analytical rigor.

Private Equity 2.0

A Culture of Collegiality and Operational Expertise

Cardinale's approach involves blending private equity sophistication with hands-on operational involvement. He emphasises the importance of collaboration and collegiality at RedBird. “I have no tolerance for political behaviour or lack of collegiality,” he states. RedBird, employing about 100 people across nine offices, plans to expand to London and Riyadh. Cardinale has hired notable executives, including former Goldman Sachs president John Thornton and Italian financier Paolo Scaroni, to lead various divisions.

Despite his intense travel schedule, Cardinale maintains a balanced lifestyle. “I wake up around 6.30am and start my day making breakfast for my kids,” he shares. His workday is filled with calls with managers at portfolio companies and RedBird investors, with a significant focus on existing deals and new acquisitions like Paramount .

"RedBird's strategic investments in sports and entertainment signify a bold evolution in private equity. By leveraging the enduring appeal of premium IP and fostering collaborations with top-tier talent, RedBird is not just investing in assets; it is redefining the boundaries of success in both industries."

Unlocking Creative IP

RedBird’s Collaborations with Hollywood’s A-List

Cardinale’s investment strategy is predicated on the belief that IP holds immense value beyond traditional distribution channels. RedBird's portfolio is a testament to this, encompassing sports teams, Formula One racing, video gaming and children's content. Cardinale summarises his strategy succinctly: "We're an IP monetisation engine."

RedBird's venture into entertainment includes backing Ben Affleck and Matt Damon's Artists Equity , acquiring production companies behind acclaimed shows like Fleabag and Squid Game: The Challenge and even a foray into children's programming with Mo Willems. Cardinale's focus is on core, premium IP that can perpetually rejuvenate itself.

The genesis of this IP-centric approach can be traced to Cardinale's early career at Goldman Sachs , where he was involved in significant deals with the New York Yankees and the Dallas Cowboys . His collaboration with sports franchises highlighted the synergy between sports and media, paving the way for his current investment ethos.

"Gerry Cardinale's focus on intellectual property is a game-changer for the industry. By recognising IP as the cornerstone of long-term value, RedBird is poised to revolutionise how content is created, distributed, and monetised. This approach guarantees a resilient and adaptable media landscape that can withstand technological upheavals and changing consumer preferences."

Cardinale's vision, however, extends beyond financial gain. He seeks to empower creatives like Affleck and Damon, ensuring they have "a seat at the economic table." His partnership with A-list celebrities, including Dwayne “The Rock” Johnson and Ryan Reynolds, highlights his commitment to enhancing their careers through strategic investments.

The New New Thing

Navigating the High-Stakes World of Private Equity with RedBird Capital

As the media industry grapples with technological upheavals and fragmented distribution models, Cardinale's focus on robust IP appears prescient. The potential acquisition of Paramount by Skydance , RedBird Capital Partners and KKR could redefine the competitive landscape - underscoring the enduring importance of quality content.

Cardinale's career, marked by his early work at Goldman Sachs and a Rhodes Scholarship, reflects a penchant for unconventional opportunities. He believes in evolving the private equity paradigm. “There’s been little innovation in private equity for four decades. Returns have compressed, yet there’s been no change to the constructs or investment methodologies. We want to be a catalyst to help evolve the private equity paradigm towards the ‘new new thing’.”

“In any endeavour, it’s essential to wake up every day with a clear purpose and a sense of urgency.” Gerry Cardinale, CEO and Founder of RedBird Capital Partners

This sense of purpose, coupled with RedBird’s robust investment strategy and commitment to independence, positions Cardinale and his firm as formidable players in the global investment landscape.

Ultimately, Cardinale’s strategy aligns with Iger’s principle: "Make great stuff." It is this simple yet profound approach that has the potential to navigate the turbulent waters of modern media and secure a prosperous future for RedBird's diverse portfolio.

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Written by Gregory Gray , CEO & Founder of Summit Communication Group

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