After months of negotiations, the Paramount-Skydance merger is finally a done deal
Paramount (NASDAQ:PARA) stock fell about 3% on Monday morning, one day after the company finalized its multi-billion-dollar merger with Skydance Media.
The deal cleared its final major hurdle on Sunday when National Amusements agreed to the terms. National Amusements, run by Shari Redstone, is the holding company that owned a majority stake in Paramount.
The new Paramount, as it is being called, is valued at $28 billion. Here are the details on the transaction and what it means for investors.
Mission: Accomplished
The transaction brings together Paramount, which owns CBS, Paramount+, Paramount Pictures, Nickelodeon, MTV, and other media properties, with Skydance Media, a leading film studio run by David Ellison, son of Oracle founder Larry Ellison.
Among the blockbuster franchises in the Paramount family are Top Gun, Mission: Impossible, Star Trek and Transformers.
The two companies had been in talks for months, so this news comes as no surprise. They had opened an exclusive 30-day negotiating window in April, but when nothing came of it, there was some uncertainty that another player might get involved.
However, it was widely reported in June that a deal between Paramount and Skydance was struck, and now it’s official since National Amusements has signed off.
Pending regulatory approvals and closing conditions, the deal is expected to close in the first half of 2025.
The deal costs Skydance about $8.4 billion overall, including roughly $4.5 billion to Paramount shareholders, $2.4 billion to National Amusements, and $1.5 billion to pay down Paramount’s debt. Skydance Investor Group, which includes the Ellison family and private-equity firm Redbird Capital Partners, will own 100% of the New Paramount Class A Shares and 69% of the outstanding Class B shares.
David Ellison will run New Paramount as chairman and CEO while Jeff Shell, the former CEO of NBCUniversal, will be the president. Paramount had been run by three co-CEOs after Bob Bakish resigned in April.
Those three co-CEOs — George Cheeks, Chris McCarthy and Brian Robbins — will now run CBS, MTV and Showtime, and Paramount Pictures, respectively.
“This is a defining and transformative time for our industry and the storytellers, content creators and financial stakeholders who are invested in the Paramount legacy and the longevity of the entertainment economy,” Ellison said. “I am incredibly grateful to Shari Redstone and her family who have agreed to entrust us with the opportunity to lead Paramount. We are committed to energizing the business and bolstering Paramount with contemporary technology, new leadership and a creative discipline that aims to enrich generations to come.”
What investors should know
On a conference call Monday morning, the leadership team said the new Paramount will be a premier destination for storytellers and a “world-class technology and media enterprise” that will use AI to enhance creativity and drive efficiencies.
“We want to make this company the leader in entertainment, and that goes for DTC (direct-to-consumer) too,” Shell said on the call, according to the Hollywood Reporter. “So we’re going to be evaluating all options to be a winner in DTC, and to be a winner in DTC really means being in the ultimate bundle that’s coming. We’ve got a bunch of inbound from a number of people about partnerships that could involve a partnership with another player or players, and so we will evaluate all that.”
Management also announced plans to generate $2 billion in run-rate cost reductions, including 50% savings in the first year. This will be a major challenge for the new group, as Paramount has accumulated some $16 billion in debt.
Is Paramount stock a buy?
Paramount stock was down about 3% on the news Monday and is off some 20% year to date, trading at around $11.45 per share.
This news has been baked into the stock price for weeks now, so the initial reaction from investors likely reflects the big challenge ahead for the new Paramount.
The company is coming off a quarter in which it had a $417 million operating loss. Paramount is also in an environment in which companies are struggling to make money in streaming and box office hits have been harder to come by.
The median price target is $12 per share for Paramount, which would be about a 6% increase. Long term, this could be a good deal for Paramount.
However, there are many challenges ahead, and there are certainly better options than Paramount stock out there right now.
