Paramount Global (NASDAQ:PARA) and Skydance Media are advancing toward a merger deal, with Skydance potentially buying out controlling shareholder Shari Redstone, according to a CNBC exclusive report. The report stated that Paramount’s Special Committee, responsible for accepting or rejecting transactions, and David Ellison’s Skydance Media are finalizing asset valuation for Skydance and equity terms for the merger.
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Details of the Deal
Skydance Media’s bid for Paramount is backed by private equity firms KKR and RedBird Capital Partners. The entertainment company is likely to be valued at $5 billion and will merge with Paramount Global. As part of this deal, Skydance CEO Ellison and the private equity firms aim to raise new equity in the range of $4.5 billion to $5 billion. Out of this funding, around $2 billion will be paid to Redstone, with the remainder likely to be used to reduce debt.
The deal is likely to be finalized in May, with the “exclusivity window” on the discussions ending on May 3. However, Skydance wants to extend this date by another two weeks. An exclusivity period generally ranges from 30 to 60 days, during which a seller cannot engage with other buyers after signing a letter of intent with a prospective buyer.
Following the merger, Skydance intends to appoint Ellison as the CEO of Paramount Global, with Jeff Shell, former NBCUniversal CEO, likely to become the President. The current CEO, Bob Bakish, would depart Paramount.
Charter’s Carriage Renewal: A Potential Hurdle
However, an important hurdle stands in the way of this deal: Paramount Global’s carriage renewal agreement with Charter Communications (NASDAQ:CHTR) for CBS and its cable networks. Carriage deals entail agreements between content providers, such as networks and studios, and distributors like cable or satellite providers.
The outcome of this deal holds significant importance for the valuation of Paramount Global, as its value may be affected by Charter’s decision to either renew the agreement or accept a lower carriage rate. With the deadline for CHTR’s agreement set for April 30, Paramount Global’s earnings report scheduled for April 29 adds further anticipation.
Why Is Paramount Up for Sale?
Shari Redstone controls 77% of the voting stock of National Amusements, the company overseeing Paramount. Redstone is contemplating selling National Amusements due to a significant shift in the media landscape from traditional television to streaming. Streaming giants like Netflix (NASDAQ:NFLX) have deeper pockets to offer sports and entertainment content.
Is Paramount a Good Stock to Buy?
Analysts remain sidelined about PARA stock, with a Hold consensus rating based on six Buys, eight Holds, and seven Sells. Year-to-date, PARA has declined by more than 15%, and the average PARA price target of $13.29 implies an upside potential of 9.1% from current levels.
