In a seismic move that sent shockwaves through the media industry, media mogul Byron Allen made a staggering $14.3 billion bid to acquire all outstanding shares of Paramount Global (PARA), leading to a significant surge in PARA stock by 13.5%. The bid, first reported by Bloomberg, offers a substantial 50% premium compared to recent trading levels, with Allen proposing $28.58 per voting share and $21.53 per non-voting share. The deal’s total value, including existing debt, is estimated to be approximately $30 billion. However, the financing details of this ambitious takeover remain unclear.
Paramount Global, whose holding company National Amusements (NAI) owns 10% of equity capital and maintains 77% of voting shares, is currently under the leadership of non-executive chairwoman Shari Redstone. This strategic move by Allen follows his previous $3.5 billion bid for BET and VHF channels in the preceding year, showcasing his persistent interest in the media conglomerate.
Financial analysts, including KeyBanc’s Brandon Nispel, have weighed in on the proposed deal, suggesting that PARA should seriously consider accepting the offer due to its attractive premium, likely acceptable to the majority of shareholders. However, Nispel anticipates that the stock may trade at a discount to the reported offer price, given Redstone’s history of valuing the business higher than the market or potential third-party acquirers.
The possibility of a bidding war has also emerged, with Warner Bros. Discovery (WBD) expressing interest in acquiring Paramount Global. This sets the stage for a potentially competitive scenario, adding complexity to the unfolding narrative. Allen’s media entity, Allen Media Group, has not provided immediate comments on the bid, and Paramount Global has opted to remain silent.
Wells Fargo analyst Steve Cahall, who recently upgraded PARA stock to Equal Weight due to the potential value unlocked by M&A activities, believes that Allen’s deal is the most probable. While initial investor skepticism centered around the financing of Allen’s offer, Cahall asserts that Allen’s interest lies in the linear assets, and there are ample buyers for the studio and content, increasing the likelihood of a successful deal. Cahall suggests that the studio and real estate could potentially finance the acquisition.
According to the Bloomberg report, Allen’s proposed strategy includes selling the Paramount film studio, known for producing blockbuster franchises like “Top Gun: Maverick” and “Mission Impossible.” Real estate and some intellectual property would also be divested, while Allen would retain ownership of the TV channels and the Paramount+ streaming service. The intention is to operate these retained assets on a more cost-efficient basis.
Paramount Global has faced financial challenges in its streaming business, reporting a direct-to-consumer (DTC) loss of $238 million in the third quarter. Last week, the company announced layoffs as part of an effort to operate as a leaner organization and reduce expenses.
This development is not the first time Paramount has been the subject of acquisition talks. Skydance Media expressed interest in taking the company private, and other potential buyers include private equity firm Apollo Global Management, WBD, and even rumors of a possible merger with NBCUniversal.
The current landscape of media mergers and acquisitions has sparked anticipation on Wall Street, with analysts predicting that a Paramount deal could trigger a broader M&A frenzy. Paramount’s relatively small market cap of around $9 billion, compared to industry giants like Disney ($177 billion) and Netflix ($240 billion), makes it an attractive acquisition target.
In the ongoing narrative of Paramount’s potential transformation, the company has committed to divesting non-core assets to reduce debt and improve its balance sheet. Last year, Paramount announced the sale of Simon & Schuster to investment firm KKR, a $1.62 billion all-cash deal completed in October.
Assets such as Showtime and BET Media Group have also been subjects of sale rumors. In December, Bloomberg reported ongoing talks about the potential sale of BET, with CEO Scott Mills and former Blackstone executive Chinh Chu expressing interest through private investment firm CC Capital Partners.
As the media industry braces for the next major merger, analysts, including Bank of America’s Jessica Reif Ehrlich, predict that Warner Bros. Discovery and NBCUniversal could also be impacted by consolidation in the next 18 to 24 months.
In conclusion, Byron Allen’s audacious bid for Paramount Global marks a pivotal moment in the ever-evolving media landscape. The potential acquisition could reshape the industry dynamics, triggering a series of strategic moves and consolidations. As stakeholders await further developments, the media world remains on the edge, poised for the next significant chapter in this unfolding narrative of mergers and acquisitions.