Shares of Paramount Global climbed as much as 14% during Friday’s trading session following reports that Skydance Media CEO David Ellison and RedBird Capital’s Gerry Cardinale are “kicking the tires” on acquiring the media conglomerate’s assets via its parent company National Amusements’ majority stake.
National Amusements owns 77.3% of Paramount Global’s Class A (voting) common stock and 5.2% of its Class B common stock.
According to Puck, there is “no official process or dealbook, but NDAs have been signed, and a small group is said to be working up the numbers.” The outlet added that Paramount non-executive chairwoman Shari Redstone is also talking to others about potential deals.
Skydance Media is currently a co-producer with Paramount on Tom Cruise projects including the “Mission: Impossible” franchise as well as film and television adaptations of “Jack Reacher.”
Representatives for RedBird Capital, National Amusements and Paramount declined to comment. A Skydance Media spokesperson did not immediately return TheWrap’s request for comment.
The report comes after Paramount filed an Executive Change of Control Severance Protection Plan with the U.S. Securities and Exchange Commission last month, which outlines the pay and benefits Paramount’s executives would receive in the event of a change in company ownership.
In recent months, Paramount has also sold publisher Simon & Schuster to investment firm KKR for $1.62 billion and its majority stake in Bellator to the Professional Fighters League for an undisclosed amount. In March, the company began exploring a sale of its majority stake of BET, but later reversed course. BET suitors included Byron Allen, who offered $3.6 billion for the network, and Tyler Perry.
In addition, the Wall Street Journal recently reported that Paramount and Apple are in talks to bundle Paramount+ and Apple TV+ at a discounted price.
In a note to clients on Friday, Wells Fargo analyst Steve Cahall said that Skydance and RedBird would be viewed as “an owner willing to transact,” potentially resulting in $15 billion in divestitures.
“In our opinion they may combine Skydance w/PARA’s existing studios, shutdown P+, sell Pluto and sell-off most of linear,” Cahall wrote. “Post very significant asset sales PARA NewCo could be an attractive growth/content company.”
But LightShed Partners analyst Rich Greenfield argued that he is not convinced that Paramount or National Amusements believes that it needs to sell.
“We suspect cost-cutting would be far more aggressive if Paramount were preparing to put itself up for sale. Maybe even more importantly, Paramount chose to bolster its Paramount+ streaming service by incorporating Showtime rather than selling Showtime for upwards of $3 billion (fully financed bid from private equity),” Greenfield wrote in a Nov. 21 research note. “If Paramount really saw its situation as dire, we suspect they would have sold Showtime. All signs point to Paramount believing in the long-term potential of Paramount+.”
Greenfield does not believe that Amazon, Apple, Google, Microsoft or Netflix would want to buy “a collection of declining broadcast/cable networks that are tied to the fading multichannel video bundle.” He added that the Federal Communications Commission’s two-network rule would prohibit NBC parent Comcast and ABC parent Disney from acquiring the media conglomerate, leaving Warner Bros. Discovery as a the only other legacy media company that could be a potential buyer.
“While scaling up and taking out cost is certainly the David Zaslav playbook, it has certainly not worked well to-date for WBD and we suspect investors would further punish WBD shares if they increased their exposure to linear television,” he added.
Greenfield noted that Paramount could potentially “sell off its studio assets, kill off its streaming assets and look for a private equity buyer for its linear TV assets that would milk the cash out of those assets or merge them with a smaller player such as the to-be-spun Starz, A&E Networks and/or AMC Networks.”
However, he argued that if that path was being pursued, Paramount “likely would have already shutdown streaming today and turned ~$1.5 billion-plus in streaming losses into hundreds of millions of profits (or more) as a licensor “arms-dealer” to third-party platforms.”
At the time, Lightshed Partners acknowledged that a possible sale of the National Amusements’ stake would be a “less expensive way” to acquire Paramount, “theoretically opening up a wider array of buyers.”
“However, we believe the Redstone family would be far more likely to first make dramatic strategic changes at Paramount,” he added. “You would give up on your streaming ambitions and harvest cash before you got to the point of selling off NAI’s stake in Paramount to the highest bidder.”
Despite the bump to Paramount’s stock, shares are still down about 5% in the past year.
