june 13 2024
The Chaotic Unraveling of the Paramount-Skydance Merger — WSJ
By Jessica Toonkel
In a short call Tuesday morning, negotiators for Paramount Global and Skydance Media worked to complete what they hoped would be a groundbreaking media merger.
Blair Effron, a partner at Centerview Partners, the bank advising Paramount's side, ended the call declaring, "We have a deal," people familiar with the conversation said.
The biggest remaining hurdle was for Paramount's controlling shareholder — National Amusements boss Shari Redstone — to sign off. Despite grueling talks over the preceding 72 hours, there was optimism in Skydance's camp and within Paramount's boardroom.
But Redstone had a big surprise in store.
As a special committee of Paramount directors convened in the afternoon to review the deal, a lawyer for National Amusements notified the board members that it wouldn't go ahead with the Skydance deal, people familiar with the situation said.
The stunning U-turn by Redstone, who had previously been a booster of the Skydance deal, capped a chaotic stretch as the parties negotiated the fate of Paramount, the iconic Hollywood company behind movie classics such as the "The Godfather" and "Titanic," the CBS broadcast network and cable channels such as MTV and Comedy Central. It followed months of haggling over a complex deal that would have ended her family's four-decade run atop the media empire.
Paramount's business challenges are immense. Cable television is in structural decline, moviegoing is in the doldrums and streaming has proven as costly as it is critical to the entertainment company's future. Moody's Ratings warned prior to the deal's collapse that unless Paramount, which has a heavy debt load, does a strategic transaction that comes with cost-cutting opportunities, its credit rating might be dinged.
As feverish negotiations unfolded in recent days, Redstone grew more concerned. She feared potential shareholder litigation over a deal that her critics said would disadvantage ordinary investors in Paramount and legal fees that might eat into her family's fortune, said people familiar with the situation.
She also told people close to her that she lost some trust in Skydance Chief Executive David Ellison after extensive back and forth with him that resulted in her family getting less cash from the deal than in earlier proposals.
Some Paramount executives became increasingly concerned about the potential deal on Sunday night. Members of a Paramount special board committee tasked with reviewing the deal joined a video conference with top Paramount executives to go over a number of requests from Skydance for how to manage the company during the months between the announcement of a merger and the closing of the deal, according to people familiar with the call.
Skydance wanted to control Paramount's content spending, requiring signoff on any movie with a budget of over $75 million and to cap TV series at $100 million each, according to people familiar with the situation.
Skydance also wanted limits on how much cash Paramount could borrow in the short term, people familiar with Skydance's requests said. Paramount's three co-CEOs, who were on the call, expressed concerns that such restrictions could hurt the company.
Path to a deal
Redstone first discussed a deal with Ellison, the son of billionaire Oracle co-founder Larry Ellison, late last year at her home in a tony Connecticut suburb, and brought the idea to her board. She was impressed with his vision for the company and shared his values on the importance of family legacy.
The heiress had passed on other opportunities to sell parts of the company, but Ellison's approach felt different. He represented a chance to keep the empire she had fought to build largely intact, where other buyers were eager to break it up.
They sketched out a two-part deal in which Skydance would first buy National Amusements, which owns about 77% of the voting shares of Paramount. In a second step, Paramount would acquire Skydance.
Under Skydance's most recent proposal, the production company would have bought National Amusements for roughly $1.7 billion in cash and provided $4.5 billion to buy out a certain number of Paramount's nonvoting shares and non-Redstone voting shares. Skydance also would have injected $1.5 billion onto Paramount's balance sheet, which it could use to pay down debt.
As the parties negotiated, former Paramount CEO Bob Bakish, who had voiced concerns about the deal, parted ways with the company and the board decided not to renominate four directors.
New bidders circled, including private-equity firm Apollo Global Management and Sony Pictures. Other parties, including media executive Edgar Bronfman Jr., backed by private-equity firm Bain Capital, and an investor consortium led by Hollywood producer Steven Paul, expressed interest in National Amusements.
Redstone's advisers and Ellison's team pressed on with negotiations, with National Amusements talks on one track and the Paramount merger on another. Neither could move forward without Redstone's blessing.
Turbulence
The Paramount special committee indicated to advisers in recent days that it was prepared to support the publicly traded company's merger with Skydance, according to people close to the situation, a critical hurdle to clear.
Redstone, who had talked to Paramount committee members periodically throughout the deal negotiations, had a different understanding of where talks stood. Redstone was told that the special committee had agreed on economic terms but that the two parties were still far apart on other matters, a person close to her said. Those outstanding issues included making the Paramount-Skydance merger subject to approval by a majority of non-Redstone shareholders.
Redstone had other growing doubts. Over the weekend, her camp haggled with Skydance over how to handle shareholder litigation that might stem from the deal. She was wary of fighting costly legal battles and wanted as much liability protection as possible.
Charles Phillips, head of the Paramount committee, who had at times voiced concerns about the deal, and at least one other director, spoke to Redstone Tuesday morning. Redstone indicated that she didn't think National Amusements was going to reach a deal with Skydance.
Phillips called an emergency meeting of its directors to relay the news to the committee.
Paramount's advisers encouraged the directors to keep going and planned to meet at 2:30 p.m. ET to go over the final points of the deal, hoping the National Amusements negotiations would turn a corner. They aimed to see the deal terms and proceed with a vote shortly thereafter.
On Skydance's side, executives prepared news releases and discussed an investor presentation to shareholders.
Minutes before Paramount's committee sat down for the planned meeting, National Amusements' lawyer notified the group's attorneys via email that it was official: Redstone's company wouldn't pursue a deal with Skydance.
Without an agreement between National Amusements and Skydance, there was no reason to vote. The Skydance deal was dead.
Redstone now plans to explore a sale of just National Amusements, while Paramount can entertain other offers. For now, the fate of Paramount remains in Redstone's hands.
- Lauren Thomas contributed to this article.
Write to Jessica Toonkel at jessica.toonkel@wsj.com
Paramount Global-B (PARA) Stock Moves -0.55%: What You Should Know
The latest trading session saw Paramount Global-B 
PARA ending at $10.90, denoting a -0.55% adjustment from its last day's close. The stock exceeded the S&P 500, which registered a loss of 1.2% for the day. Meanwhile, the Dow lost 0.65%, and the Nasdaq, a tech-heavy index, lost 1.79%.
The company's stock has dropped by 2.23% in the past month, exceeding the Consumer Discretionary sector's loss of 4.46% and lagging the S&P 500's loss of 0.85%.
Analysts and investors alike will be keeping a close eye on the performance of Paramount Global-B in its upcoming earnings disclosure. The company's earnings report is set to go public on April 29, 2024. The company's earnings per share (EPS) are projected to be $0.31, reflecting a 244.44% increase from the same quarter last year. Meanwhile, our latest consensus estimate is calling for revenue of $7.75 billion, up 6.61% from the prior-year quarter.
PARA's full-year Zacks Consensus Estimates are calling for earnings of $1.17 per share and revenue of $30.84 billion. These results would represent year-over-year changes of +125% and +4.02%, respectively.
Investors might also notice recent changes to analyst estimates for Paramount Global-B. These latest adjustments often mirror the shifting dynamics of short-term business patterns. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.
Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.
The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 2.03% lower within the past month. As of now, Paramount Global-B holds a Zacks Rank of #3 (Hold).
Digging into valuation, Paramount Global-B currently has a Forward P/E ratio of 9.34. This indicates a discount in contrast to its industry's Forward P/E of 16.96.
It's also important to note that PARA currently trades at a PEG ratio of 0.41. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. As of the close of trade yesterday, the Media Conglomerates industry held an average PEG ratio of 1.83.
The Media Conglomerates industry is part of the Consumer Discretionary sector. With its current Zacks Industry Rank of 93, this industry ranks in the top 37% of all industries, numbering over 250.
The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
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Byron Allen seeks television assets in Paramount bid - sources
Media mogul Byron Allen is focused on acquiring Paramount Global's (PARAO) television networks and stations, people familiar with the matter said on Wednesday, as part of a $14 billion offer to buy the company.
He envisions selling off key assets including the studio lot in Los Angeles, the film studio, Paramount Pictures, and popular franchises, such as "Top Gun," "The Godfather" and "Beverly Hills Cop," according to one person familiar with the matter.
Allen, who last year made an offer to acquire Walt Disney's ABC network and other TV assets, is interested in Paramount's CBS broadcast network, its sports and news operations and its local stations.
These assets would augment Allen Media Group's television holdings, with its 28 network-affiliated stations in 21 markets and cable portfolio that includes The Weather Channel and Comedy.TV,
The comedian and producer has bet on television at a time when it has fallen out of favor among major media companies.
"Byron Allen did submit a bid on behalf of Allen Media Group and its strategic partners to purchase all of Paramount Global's outstanding shares," Allen Media Group said Tuesday in a statement.
"We believe this $30 billion offer, which includes debt and equity, is the best solution for all of the Paramount Global shareholders, and the bid should be taken seriously and pursued."
Paramount could not be reached for comment on Allen's offer, which was first reported by Bloomberg. The company is contemplating a sale, as the deterioration of the global entertainment business has wiped out more than $16 billion in value from the media company formed through the hard-fought reunion of CBS and Viacom in 2019.
In September, Allen offered $10 billion for the ABC network and other television assets in a text to Disney CEO Bob Iger, who later elected not to sell. Allen also sought a minority stake in Paramount's BET and VH1, though the media company dropped the sale process after failing to get a satisfactory bid.
Allen is not the only prospective suitor for Paramount. Skydance Media, Warner Bros Discovery and Apollo Global all have expressed interest.
David Ellison's Skydance is in discussions with Paramount, working under a non-disclosure agreement as it gathers information before making a decision about a possible transaction as part of due diligence, according to another source familiar with the matter.
A Skydance spokesperson declined comment.
Ellison is exploring making a bid to acquire entertainment giant Paramount's parent company, National Amusements, and subsequently merging Paramount with Skydance, the company behind such films as "Top Gun: Maverick" and "Mission: Impossible - Dead Reckoning Part One."
Paramount Global-B (PARA) Moves 6.7% Higher: Will This Strength Last?
Paramount Global-B PARA shares rallied 6.7% in the last trading session to close at $14.59. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 5% loss over the past four weeks.
The upswing in share price came on news that Allen Media Group made an unsolicited $30 billion acquisition offer to acquire the entertainment conglomerate. Allen Media Group is offering $21.53 per share for all of Paramount Global’s Class B nonvoting stock — a 57% premium over the Jan 30 closing price of $13.68 — and $28.58/share for the Class A voting stock.
This company is expected to post quarterly loss of $0.04 per share in its upcoming report, which represents a year-over-year change of -150%. Revenues are expected to be $7.8 billion, down 4% from the year-ago quarter.
While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For Paramount Global-B, the consensus EPS estimate for the quarter has been revised 4.8% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on PARA going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank #3 (Hold).
Paramount Global-B is a member of the Zacks Media Conglomerates industry. One other stock in the same industry, Sphere Entertainment 
SPHR, finished the last trading session 0.7% higher at $35.38. SPHR has returned 4.9% over the past month.
For Sphere Entertainment, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at -$0.73. This represents a change of -132.4% from what the company reported a year ago. Sphere Entertainment currently has a Zacks Rank of #1 (Strong Buy).
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