Has Paramount Global finally closed a deal?
One of the longest-running dramas in the stock market this year was the fate of media and entertainment stocks. paramount global (NASDAQ:PARA).
The struggling company, which owns Paramount Pictures, CBS, MTV, Paramount+ and others, has been the subject of merger talks for months and has been linked to a variety of potential partners.
We thought things were getting real when Paramount and Skydance Media set an exclusive 30-day negotiating period in early April. But as 30 days passed without an agreement, and other suitors resurfaced, it looked like the Skydance deal might not go through.
But on Monday, it was widely reported by various media outlets, including CNBC and the Wall Street Journal, that a deal had been reached. Neither company had confirmed the agreement as of Monday afternoon, but Paramount stock jumped about 9% on the news.
What the transaction looks like
The deal calls for David Ellison’s Skydance Media to acquire National Amusements, a holding company owned by Paramount controlling shareholder Shari Redstone, for $2 billion, according to CNBC and other media outlets.
Film and TV production company Skydance, along with private equity partners Redbird Capital and KKR, reportedly plan to purchase approximately 50% of Paramount stock for $15 per share, for a total of $4.5 billion. The deal reportedly saw the group contribute $1.5 billion to reduce Paramount’s debt.
The $8 billion deal will give Skydance and its partners two-thirds of Paramount Global stock and a controlling stake in the company. Meanwhile, Class B shareholders will own the remaining third.
CNBC reports that Paramount’s special committee has agreed to terms with Skydance, but Redstone and National Amusements have not yet approved them.
However, according to multiple sources, Redstone has long favored a Skydance partnership because the offer they presented left Paramount largely intact. Other proposals reportedly seek to split the company into several pieces.
Paramount is scheduled to hold its annual shareholder meeting on Tuesday, so look for any news or announcements unless it comes sooner.
What the Deal Means for Paramount Stock
This is a deal that has not been completed as of Monday afternoon, but most reports suggest it is inevitable. It seems like a pretty good deal for Paramount. This surpasses the previous Skydance offer of about $5 billion.
In this deal, Redstone and National Amusements will receive more money, with shareholders receiving $15 per share instead of $11 per share in the last offer. The $15 per share offer represents a 16% premium to the current stock price of $12.94 per share.
Analysts were generally optimistic about the deal. “This is a strong opportunity for Shari Redstone to sell to Skydance, making everyone reasonably happy and maintaining the Paramount legacy,” Wells Fargo analyst Steven Cahall wrote in a research note.
Wells Fargo set a price target for Paramount of $14 per share. However, the median price target among analysts covering the stock is $12 per share, which is 7% below the current price.
Investors should remain in wait-and-see mode until more details about the deal and what the new company will look like are revealed. A struggling streaming business and a lackluster year for the overall movie box office pose additional challenges for Paramount.
