An acquisition by Skydance Media now looks to be the most likely outcome for Paramount
Paramount Global (NASDAQ:PARA) stock slid 7.15% to $10.52 on Tuesday on news of former Warner Music CEO Edgar Bronfman Jr. withdrawing his offer to buy the company out.
Bronfman Jr.’s offer would have been worth a combined $6 billion for Paramount Global and National Amusements.
In light of the withdrawn bid, the new frontrunner looks likely to be Skydance Media, a media production company run by David Ellison, son of Oracle (NYSE:ORCL) founder Larry Ellison. A merger between Paramount and Skydance looked to be on the cards earlier this year, but it collapsed in July.
“The Skydance transaction is expected to close in the first half of 2025, subject to regulatory approvals and other customary closing conditions,” Paramount said in a statement earlier this week, adding that it has ended its “go-shop process”.
Analysis: Why Paramount Global stock tanked
Stock traders expressed their consternation because Bronfman Jr. proposed a deal that wouldn’t dilute Paramount Global’s existing shareholders. In contrast, Ellison’s roughly $8 billion offer for Paramount Global and National Amusements would likely dilute the current investors’ shares.
It’s also possible that investors liked the idea of Bronfman Jr., a media industry veteran, helping to shape Paramount Global’s future. Not only did Bronfman Jr. previously run Warner Music, but he’s currently the executive chairman of FuboTV (NYSE:FUBO).
In addition, it looks like the bidding war is over, so there’s no reason for Ellison to make any effort to sweeten his Paramount Global buyout offer at this point. This puts Paramount Global in a more difficult position from a negotiating standpoint.
This doesn’t mean Paramount Global isn’t an attractive business for a takeover. The company owns a range of valuable entertainment assets, including CBS, MTV, BET, Paramount+, Showtime, Comedy Central and Nickelodeon.
Nonetheless, Paramount Global’s shareholders are undoubtedly losing patience. The stock has declined almost continuously since topping out at around $100 in 2021. At this point, Paramount Global and its stakeholders are in dire need of a positive catalyst.
Paramount’s future is clearer but still uncertain
Regardless of the circumstances of an eventual buyout, Paramount Global will almost certainly benefit from a takeover. For what it’s worth, the company posted adjusted earnings of $0.54 per share in 2024’s second quarter, beating the analysts’ consensus estimate of $0.13 per share.
However, Paramount Global generated revenue of $6.81 billion, missing Wall Street’s consensus call for $7.24 billion. Furthermore, Paramount Global announced a nearly $6 billion goodwill impairment charge (i.e., a write-down) for its Cable Networks unit.
Other signs of trouble include Paramount Global’s upcoming 15% reduction of its U.S. workforce, as well as the company’s plans to shut down its Paramount Television studio. These actions may help to reduce Paramount Global’s expenditures, but they’re certainly not signs of a thriving company.
What’s left for Paramount Global, then, is a future that’s more certain because everybody knows who’s buying out the company, but also less certain because it’s difficult to know exactly how Ellison will change Paramount Global.
As for Paramount Global stock, it’s cheaper after Tuesday’s sell-off, but it’s hard to call the stock a bargain when a win-win scenario is far from assured.
