The special committee of the Board of Directors of Paramount Global (NASDAQ:PARA) has approved a merger agreement with Skydance Media. The deal will proceed in two steps. First, Skydance will acquire National Amusements, which holds the controlling stake in Paramount. Following the completion of this acquisition, Paramount will merge with Skydance, creating a media powerhouse.
The merger between Paramount Global and Skydance Media will boost their positions in the tough media and entertainment landscape.
Market Reaction and Deal Structure
Last week, the Wall Street Journal reported that Skydance Media had reached a preliminary agreement to acquire National Amusements. This announcement had a positive impact on Paramount’s stock. Shares of PARA have gained about 16% since the news broke.
Per the report, Skydance plans to purchase National Amusements for $1.75 billion, an increase from its previous offer of $1.7 billion. Additionally, Skydance intends to infuse cash into Paramount’s balance sheet to lower its debt burden.
It is important to note that a 45-day window remains open for other potential buyers to submit competing offers.
A Complex Negotiation History
This acquisition comes after an extended and complex negotiation process between Skydance and Paramount. The negotiations initially stalled when Shari Redstone, the media heiress, opted not to sell her controlling stake in Paramount Global.
However, the talks have now resumed with updated terms and a higher valuation.
Is Paramount a Buy or Sell?
While Paramount stock has recovered a bit over the past week, it is still down about 19% year-to-date. The uncertainty surrounding the transaction until now and concerns about Paramount’s long-term viability as a standalone entity have weighed on the stock.
Paramount also faces intense competition in the streaming industry. Moreover, the challenges in linear cable and broadcast networks due to the industry-wide shift towards connected TV are concerns.
Wall Street remains cautious about Paramount’s prospects. The stock has a Moderate Sell consensus rating based on two Buys, five Holds, and nine Sell recommendations. The analyst’s average price target for PARA stock is $11.68, implying 1.1% down potential from current levels.
