Paramount Global (PARA) shares skyrocketed more than 10% in early trading on Wednesday after Bloomberg reported media mogul Byron Allen made a $14.3 billion bid to buy all of Paramount’s outstanding shares.
According to the report, Allen offered $28.58 each for the company’s voting shares, marking a 50% premium compared to recent trading levels, and $21.53 for non-voting shares. Including existing debt, the total value of the deal mounts to roughly $30 billion. It’s unclear how he would finance the takeover.
National Amusements (NAI), Paramount’s holding company, owns approximately 10% of Paramount’s equity capital value and maintains 77% of voting shares — valued at around $1 billion. Shari Redstone currently serves as the non-executive chairwoman of Paramount Global.
Allen has actively expressed his interest in the company. He made a $3.5 billion bid for its BET and VHF channels last year.
“We think PARA should immediately take this deal, as it represents >50% premium to yesterday’s close, which is likely an acceptable premium for the majority of PARA’s shareholders,” KeyBanc analyst Brandon Nispel wrote in a new note to clients on Wednesday.
“In addition, a cash offer is likely highly appealing,” the analyst continued. “However, we expect the stock to trade with a large discount to the reported offer price given Shari Redstone’s (PARA’s controlling shareholder) history of consistently believing the business is worth more than the market, or a willing third party, is willing to offer.”
Nispel added there could be potential for a bidding war with Warner Bros. Discovery (WBD), which has also expressed interest in acquiring the company.
Byron Allen’s Allen Media Group, did not immediately respond to Yahoo Finance’s request for comment. Paramount Global declined to comment.
US television producer Byron Allen arrives for the 2023 Baby2Baby Gala in Los Angeles, California, on November 11, 2023. Allen reportedly made a $14.3 billion bid for Paramount Global. (Photo by Michael Tran / AFP) (Photo by MICHAEL TRAN/AFP via Getty Images) (MICHAEL TRAN via Getty Images)
Wells Fargo analyst Steve Cahall, who recently upgraded the stock to Equal Weight due to potential M&A unlocking value, added Allen’s deal seems the most probable.
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“While investors were initially skeptical Allen’s offer can be financed, we think he wants the linear assets and there are ample buyers for the studio/content. This increases the probability something comes together, which will keep shares elevated,” he wrote on Wednesday. “The implication is studio/real estate finances the deal.”
Per the report, Allen plans to sell the Paramount film studio, which has produced top movies from “Top Gun: Maverick” and the “Mission Impossible” franchise to the recent breakout thriller “Smile” and kid-friendly “Paw Patrol.”
He would also sell real estate and some other intellectual property but retain the TV channels and Paramount+ streaming service. He would plan to run them on a more cost-efficient basis, Bloomberg noted.
The company has been bleeding money in its streaming business. Although losses have narrowed, Paramount still reported a direct-to-consumer (DTC) loss of of $238 million in the third quarter.
Last week, Paramount announced layoffs in an internal memo obtained by Yahoo Finance. The media giant cited the need to “operate as a leaner company and spend less.”
“As it has over the past few years, this does mean we will continue to reduce our workforce globally. These decisions are never easy, but are essential on our path to earnings growth,” the memo read. No specific numbers or timeline was provided.
Paramount’s long-rumored sale
Shari Redstone, president of National Amusements and Vice Chairman, CBS and Viacom speaks at the WSJTECH live conference in Laguna Beach, California, U.S. October 21, 2019. REUTERS/ Mike Blake (REUTERS / Reuters)
Paramount has long been viewed as a potential acquisition target. Just last week, the stock jumped on reports production studio Skydance Media wants to take all of Paramount private.
Outside of Skydance, private equity firm Apollo Global Management, the parent company of Yahoo Finance, along with competitor WBD have also been rumored as potential buyers.
WBD CEO David Zaslav and Paramount CEO Bob Bakish met to discuss a possible merger back in December, Axios first reported.
Both companies declined to comment on the meeting, although Paramount has certainly become the industry’s No. 1 pick for a breakup or merger due to its small size relative to competitors — which has also meant getting passed over by some consumers that only want to pay for so many streamers.
The company boasts a current market cap of just around $9 billion, compared to Disney’s (DIS) $177 billion and Netflix’s (NFLX) $240 billion.
The company recently committed to divesting non-core assets as it works to pare down debt and improve its balance sheet. Last year, it announced the sale of Simon & Schuster to investment firm KKR after the publishing giant’s sale to Penguin Random House collapsed late last year. The $1.62 billion all-cash deal was completed in October.
Showtime and BET Media Group are two assets that have also recently been the subject of sale rumors.
In December, Bloomberg reported Paramount was once again in talks to sell BET — this time to its CEO Scott Mills and former Blackstone executive Chinh Chu, who now runs private investment firm CC Capital Partners.
Wall Street seems ready for the next big media merger to happen with analysts predicting a Paramount deal could set off an M&A frenzy.
In addition to Paramount, Bank of America analyst Jessica Reif Ehrlich predicted Warner Bros. Discovery and NBCUniversal (CMCSA) are also “likely to be impacted [by consolidation] over the next 18 to 24 months.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].
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