Paramount Global returns to the field this week with two suitors still pursuing the company that has been surrounded by very public M&A drama for months. And this is unlikely to end anytime soon.
The company reached the end of its 30-day exclusive negotiation period with Skydance Media on May 3 without reaching an agreement. Sony Pictures Entertainment and Apollo Global Management, meanwhile, are moving forward with a $26 billion all-cash offer, raising regulatory and political concerns in this election year. The special committee of Paramount Global’s board of directors that conducted the merger and acquisition negotiations now plans to move forward with talks with both the Skydance and Sony/Apollo groups, as reported on Sunday by the New York Times and confirmed by multiple sources.
That decision leaves Skydance CEO David Ellison and his backers, including Gerry Cardinale’s RedBird Capital, with a decision to make after failing to reach an agreement during their exclusive courtship. After months of talks between Paramount Global and Skydance, it’s hard to see the motivation for Ellison to hang on much longer if Paramount goes deep into negotiations with Sony/Apollo. However, the Sony/Apollo partnership could be a fig leaf for Paramount’s board of directors, which is all but assured of shareholder lawsuits if it accepts the offer currently outlined with Skydance Media. That transaction, even after the Skydance team agreed to add more money to Paramount’s balance sheet, is seen as too generous for controlling shareholder Shari Redstone, at the expense of common shareholders. A representative for Ellison declined to comment.
Whatever happens next for Paramount Global, it will likely play out slowly. The special committee is expected to initiate a formal process with Sony/Apollo that will take time to facilitate meetings, data sharing, proposals and counter-proposals. That transaction would require careful handling because federal regulators under the Biden administration have taken a hard line against consolidation and opposed proposed transactions, including Paramount’s sale of Simon & Schuster to Penguin Random House and the purchase of Spirit Airlines by JetBlue Airways. Any deal involving Paramount will be closely scrutinized by the Justice Department, the Federal Trade Commission and the Federal Communications Commission. A spokesperson for the special committee declined to comment.
A third option for Paramount Global was introduced last week with the April 29 creation of the three-part Office of the CEO, following the forced resignation of CEO Bob Bakish after nearly eight years at the helm. The possibility of Paramount continuing as a standalone entity seems like a long shot. But company insiders were told that the trio of CBS’ George Cheeks, Paramount Networks/MTV Studios’ Chris McCarthy and Paramount Pictures/Nickelodeon’s Brian Robbins will have a chance to present a long-term strategic vision for reviving the company struggled amid the larger business swings in film and TV.
As details of the CEO shakeup filtered through the ranks last week, there was some hope that an outright change of ownership for Paramount Global might not be a fait accompli. For insiders at a company that has weathered nearly a decade of turmoil, continuing with the newly installed triumvirate is seen as a diabolical option.
The Skydance offer comes with the promise that a new management team led by Ellison and Jeff Shell of RedBird will take the helm. A sale to Sony/Apollo would potentially drive the divestiture of CBS or other major assets. The uncertainty about what lies ahead for Paramount Global’s various arms has become both a moral drag for employees and a financial drag on the company’s stock price. Shares of Paramount Global fell 7% on Friday to close at $12.89, amid reports that talks with Skydance appeared to falter as the exclusive negotiating window came to an end.
None other a renowned investor than Warren Buffett expressed his frustration with Paramount Global in his remarks at Berkshire Hathaway’s annual shareholder meeting this weekend. Buffett surprised the industry by buying shares in Paramount Global in early 2022. By the end of last year, Berkshire had amassed 63.3 million shares, according to CNBC. On May 4, Buffett confirmed at the shareholders meeting in Omaha, Neb. that he sold all of Berkshire’s shares in Paramount.
“We lost quite a bit of money” on Paramount, Buffett told the audience. The investor, who is known for doing his homework on companies before placing his bets, described it as a learning experience that made him think about the entertainment market in general.
“I’ve certainly been thinking more about the whole question of what people do with their spare time and what are the guiding principles of running an entertainment business of any kind, whether it’s sports or movies or whatever it may be, ” said Buffett. ‘And I think I’m smarter now than I was a few years ago. But I also think I am poorer because I acquired the knowledge the way I did.”
