Paramount's Stock Surges Amid Buyout Discussions with Apollo and Sony
Paramount (PARA) saw its stock surge by as much as 15% Friday, propelled by significant media buzz surrounding potential acquisition interests from Apollo Global Management alongside Sony Pictures Entertainment. This flurry of market excitement stems from reports indicating Apollo and Sony's combined efforts to forge a joint buyout bid that could reshape the media landscape.
Previously, Paramount reportedly turned down Apollo's $26 billion all-cash proposition, which encapsulated $14 billion in debt, aimed at acquiring the conglomerate in its entirety. Additionally, a separate $11 billion offer directed solely at the company's studio segment from Apollo was also declined.
CFRA analyst Ken Leon sees these unfolding events as a boon for Paramount's shareholders, including major stakeholder Shari Redstone. Should a complete cash purchase of PARA shares materialize, the allocation would likely see Apollo taking command of network assets like CBS and local TV station licenses, while Sony could gain equity in non-FCC license holdings, including movies and television programs.
Despite the buzz, Paramount has kept mum, offering no comment on the reported negotiations.
In a parallel development, Paramount has been reportedly engaged in exclusive merger discussions with David Ellison's Skydance Media. This move, however, has not been devoid of controversy, with several shareholders voicing concerns over deal terms perceived as overly favorable to Redstone. Amid such contention, a recent proxy filing revealed that four Paramount board members, including Ostroff, Seligman, and Terrell, will not seek re-election. Their departure casts a shadow of uncertainty over the potential impact on the Skydance merger discussions.
It's important to note that National Amusements, under the helm of Redstone, holds a significant sway over Paramount, owning approximately 10% of its equity capital value and a commanding 77% of voting shares. Critics argue that any merger discussions lacking competitive bidding — favoring an exclusive dialogue with a single buyer — potentially skews the fair market value of the company.
Meanwhile, Paramount continues to grapple with challenges in its streaming sector, reporting a considerable direct-to-consumer (DTC) loss of $490 million in the fourth quarter, amid escalating cord-cutting trends. In response, the company has implemented various cost-efficiency measures, including layoffs and business restructurings, in a bid to stabilize its financial ship.
The unfolding narrative around Paramount's potential sale underscores the dynamic and often unpredictable nature of the media industry, with strategic mergers and acquisitions representing both opportunities and hurdles for key players involved.
Analyst comment
Positive news: Paramount’s stock surges amid buyout discussions with Apollo and Sony.
As an analyst, it is likely that the market will view this news positively, as it indicates potential acquisition interests and a reshaping of the media landscape. If a complete cash purchase of Paramount shares materializes, Apollo and Sony could gain control of network assets and equity in non-FCC license holdings. However, Paramount’s challenges in the streaming sector and controversy surrounding its merger discussions with Skydance Media may add some uncertainty to the potential impact on the market.
