Paramount Global (NASDAQ: $PARA) is a multinational mass media and entertainment corporation behind well-known brands like Paramount Pictures, CBS, MTV, Nickelodeon, BET, Comedy Central, and the Paramount+ streaming service. With a strong film, television, publishing, and broadcasting presence, Paramount Global is one of the largest media conglomerates worldwide.
Paramount Global Begins Exclusive Merger Talks
According to an exclusive WSJ report on Wednesday, April 3, 2024, Paramount Global had entered into exclusive merger discussions with Skydance, the production company led by David Ellison. This decision follows Paramount’s preference for Skydance over Apollo Global Management’s recent $26 billion all-cash offer.
Paramount’s board prioritized negotiations with Skydance over Apollo’s proposal, granting the production firm a strategic advantage. The exclusive negotiations mean a 30-day pause on all negotiations with other bidders. Previously, Apollo had tabled a $11 billion bid for Paramount’s film division, subsequently elevating its bid to $26 billion for the entire company, including debt. Paramount’s board of directors opted to proceed with Skydance due to uncertainty surrounding Apollo’s financing for its bid.
Shari Redstone’s Negotiations with Skydance
Shari Redstone, who holds about 77% of Paramount’s voting shares via National Amusements, has engaged in negotiations with David Ellison. While the terms of the agreement have been settled, Skydance insists on integrating their studios as a prerequisite to finalizing the transaction.
However, merging Paramount Global and Skydance requires approval from an independent committee of Paramount directors. This committee must ensure the deal benefits all shareholders, not just National Amusements. Paramount’s management, including CEO Bob Bakish, is excluded from these discussions. A complete merger poses greater complexity with no agreement guarantee. Paramount executives emphasize their goal of creating value for all shareholders.
Paramount+ International Expansion
The merger discussions coincide with Paramount’s struggles to make its streaming service profitable despite an uncertain ad market and declining cable subscribers. On March 19, Paramount announced plans to launch international subscription offerings. The “Basic (with ads)” plan aims to give viewers more choices and flexibility. Its rollout is slated for April in Canada and June in Australia, with pricing set at CAD$6.99 and AUD, respectively.
Paramount’s Stock Movement
Paramount’s stock has declined over the years, reflecting its struggles in the streaming era. However, news of the potential merger had injected optimism, with shares rising 14.97% to $13.52, on Wednesday, April 3, 2024, marking Paramount’s largest one-day increase since November. However, the stock’s 52-week change of -37.58% differs greatly from the S&P500’s 52-week change of 26.95%.
On Thursday, April 4, 2024, the stock sank 8.51% , closing at $12.37 per share after it emerged that Paramount would need to raise around $3 billion in new cash if the merger with Skydance Media is to proceed.
The closing price is close to its 200-day Moving Average of $13.62 and higher than its 50-day Moving Average of $12.14. Its trading range spanned a high of $13.52 to a low of $12.10, with an intraday market capitalization of $9.17 billion.
Is Paramount Global a Buy?
Paramount Global stands at a significant juncture, engaging in exclusive merger negotiations with Skydance while expanding into streaming platforms. The resolution of these conversations carries immense potential for Paramount’s trajectory, with ramifications that could favorably influence the broader media landscape.
While investors see huge potential in the company’s future, its current balance sheet is not great; its market cap is $9.17 billion with around $13 billion in net debt. However, the huge interest from investors means it could be a lucrative long-term play.
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