Paramount Global’s Stock Surge and The Byron Allen Effect

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Written By Nathan Goldstein

In a remarkable turn of events, Paramount Global’s shares witnessed an impressive surge following a buyout bid by media tycoon Byron Allen. The proposal, detailed in a Bloomberg report, revealed Allen’s ambitious plan to acquire Paramount’s outstanding shares, sparking a flurry of interest in the media industry.

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The Financial Dynamics of the Offer

Allen’s proposal, estimated at a whopping $14.3 billion, targets Paramount’s outstanding shares. This bold offer translates to $28.58 per voting share, a substantial 50% premium over the stock’s recent trading levels.

Byron Allen Adds Six New Board Members as Mogul Aims at Expansion – The  Hollywood Reporter
Credits: Hollywood Reporter

Non-voting shares are pegged at $21.53 each. Factoring in Paramount’s existing debt, the total valuation of the deal approximates a staggering $30 billion. The intricacies of financing this takeover, however, remain unclear.

Paramount’s Ownership Structure and Past Bids

The company’s current ownership lies with National Amusements (NAI), Paramount’s holding company. NAI holds approximately 10% of Paramount’s equity capital value and a dominant 77% of voting shares, the latter valued at around $1 billion.

Shari Redstone currently serves as the company’s non-executive chairman. Allen’s interest in Paramount isn’t new; he previously made a $3.5 billion offer for Paramount’s BET and VH1 channels last year.

Industry Analysis and Responses

KeyBanc analyst Brandon Nispel offered a sharp analysis, advocating for Paramount to accept Allen’s offer. “We think PARA should immediately take this deal, as it represents >50% premium to yesterday’s close, which is likely an acceptable premium for the majority of PARA’s shareholders,” he wrote.

He further highlighted the attractiveness of a cash offer but noted the potential for the stock to trade at a discount, considering Shari Redstone’s history of valuing the business above market or third-party offers.

Nispel also mentioned the possibility of a bidding war, with Warner Bros. Discovery showing interest in Paramount.

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Allen Media Group and Paramount’s Stance

The Allen Media Group, founded by Byron Allen, did not respond immediately to inquiries from Yahoo Finance. Similarly, Paramount Global abstained from commenting on the situation.

Wells Fargo analyst Steve Cahall, who had recently upgraded Paramount’s stock to ‘Equal Weight’ due to potential M&A unlocking value, commented on the feasibility of Allen’s bid.

“While investors were initially skeptical Allen’s offer could get financed, we think he wants the linear assets, and there are ample buyers for the studio/content. It increases the probability something comes together, which will keep shares elevated,” he remarked. Cahall sees the studio and real estate assets as key to financing the deal.

Allen’s Strategic Plans for Paramount

Reportedly, Allen aims to divest Paramount’s film studio, known for hits like “Top Gun: Maverick” and “Mission Impossible,” alongside selling real estate and some intellectual property.

His focus would be on retaining and efficiently managing the TV channels and the Paramount+ streaming service.

Paramount’s Ongoing Challenges

Paramount has been grappling with financial losses in its streaming segment, with a reported direct-to-consumer (DTC) loss of $238 million in the third quarter. The company recently announced layoffs as part of a strategy to operate leaner and reduce expenses.

Speculations and Future of Paramount

Paramount has long been speculated as a prime candidate for acquisition, with entities like Skydance Media, Apollo Global Management, and Warner Bros. Discovery being potential buyers.

The company has also committed to divesting non-core assets to improve its balance sheet, including the sale of Simon & Schuster to investment firm KKR.

Industry Perspectives on Media Mergers

Abu Dhabi Uae Circa 2019 Warner Brothers Theme Park Warner — Stock Photo, Image
Credits: DepositPhotos

The prospect of a Paramount deal has set the stage for a potential flurry of mergers and acquisitions in the media sector. Analysts predict that other major players like Warner Bros. Discovery and NBC Universal might also be affected by this wave of consolidation in the near future.

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