Paramount Global (PARA) shares tumbled nearly 8% on Tuesday after Shari Redstone, who controls the company through her family's holding company National Amusements (NAI), abruptly ended merger talks with Skydance Media. The surprising development comes after months of negotiations and despite an independent special committee of Paramount's board recommending the economics of the Skydance deal.

In a statement, National Amusements said it was unable "to reach mutually acceptable terms regarding the potential transaction with Skydance Media for the acquisition of a controlling stake in NAI." The company expressed gratitude to Skydance for their efforts and stated that it will continue to support and explore opportunities to drive value creation for all Paramount shareholders.

The Wall Street Journal reported that Redstone will now likely pursue a sale of NAI rather than attempting to merge Paramount into another company. Hollywood producer Steven Paul and media executive Edgar Bronfman Jr. have reportedly expressed interest in acquiring NAI.

Skydance, known for collaborating with Paramount on popular film franchises such as "Mission Impossible," "Top Gun: Maverick," and "Transformers," had revised its offer multiple times to address concerns raised by nonvoting shareholders. The latest proposal, valued at $8 billion, included Shari Redstone selling National Amusements' controlling stake in Paramount for around $2 billion and merging Skydance's studio business with Paramount's at a valuation just under $5 billion. Skydance and its affiliates, backed by private equity firms RedBird Capital and KKR, also offered a cash injection of $1.5 billion to help reduce Paramount's debt.

However, a disconnect emerged between the parties involved regarding the reasons for the deal's collapse. The Skydance bidding consortium blamed Redstone's inability to let go of a family asset, her desire for more money for NAI, and private comments critical of David Ellison from Paramount board member Charles Phillips as likely factors. On the other hand, Redstone and the special committee had requested a "majority of the minority vote" clause, which the Skydance consortium found unacceptable and impracticable to add after deal talks had progressed.

The abrupt end to the Paramount-Skydance merger talks comes just days after the companies had agreed to merger terms and following Paramount's annual shareholder meeting, where the company's leadership outlined plans for the future. The "Office of the CEO" consortium, comprising CBS CEO George Cheeks, Paramount Media Networks CEO Chris McCarthy, and Paramount Pictures CEO Brian Robbins, unveiled a plan to cut $500 million in costs, explore potential asset sales, and seek partnerships with competitors for streaming joint ventures.

Redstone, who voiced her support for the leadership team during the shareholder presentation, can now consider other offers for National Amusements from outside buyers. In May, Apollo Global Management and Sony formally expressed interest in acquiring Paramount for $26 billion, but their plan to break up the company and separate its movie studio from other parts of the business was not favored by Redstone.

As Paramount navigates this uncertain period, the company's leadership has emphasized the need to reduce debt and regain an investment-grade rating. With approximately $14.6 billion in long-term debt as of March 31, the cost-cutting measures and potential asset sales outlined by the CEO consortium will be crucial in positioning the company for long-term sustainable growth.