Paramount Global (PARA) will merge with production company Skydance Media to establish a new entity through a two-step transaction, which includes the acquisition of the mass media and entertainment conglomerate's controlling shareholder, National Amusements.

Skydance's investor group, including Chief Executive David Ellison's family and investment firm RedBird Capital Partners, will purchase National Amusements for $2.4 billion in cash, the companies said in a Sunday statement. National Amusements, which holds about 77% of Paramount's class A shares, has approved the deal. Paramount's stock climbed 3.9% in premarket activity Monday.

Skydance will also offer $4.5 billion in cash or stock to Paramount's other shareholders for the merger and provide an additional $1.5 billion for the company's balance sheet. Skydance shareholders will receive 317 million newly issued class B shares in the new company, valuing Skydance at $4.75 billion based on $15 per Paramount class B share. Paramount's class A stockholders will receive $23 per share in cash or stock.

The production firm will combine with Paramount to form New Paramount, which is expected to have an enterprise value of roughly $28 billion. The transaction, which requires clearance from regulators, is anticipated to close in the first half of next year. Skydance will own 100% of the combined entity's class A shares, or 70% of the pro forma shares outstanding, while class B stockholders will have a 30% stake.

"Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king," Paramount Chair and National Amusements CEO Shari Redstone said in a statement. "As a longtime production partner to Paramount, Skydance knows Paramount well and has a clear strategic vision and the resources to take it to its next stage of growth."

Ellison will lead New Paramount as chairman and chief executive, while Jeff Shell, chairman of RedBird Sports & Media, will become president.

"This is a defining and transformative time for our industry and the storytellers, content creators and financial stakeholders who are invested in the Paramount legacy and the longevity of the entertainment economy," Ellison said. "We are committed to energizing the business and bolstering Paramount with contemporary technology, new leadership and a creative discipline."

The deal also includes a 45-day go-shop period during which Paramount's special committee of board of directors can actively solicit and evaluate alternative acquisition proposals.