On Tuesday, shares of Paramount Global fell after news came out that Shari Redstone’s National Amusements, which controls Paramount (Para, -7.85%), had called off merger talks between Skydance Media and the media and entertainment giant Paramount.
The move comes after weeks of tensions surrounding the deal, which saw Paramount’s CEO and several board directors quit, new bidders come forward and angry shareholders who thought the deal with Skydance would benefit Redstone at the expense of them.
The Wall Street Journal wrote about the news that the talks did not work out. The Journal said that Redstone is now more likely to try to sell National Amusements alone instead of trying to merge Paramount with another business.
Paramount wouldn’t say anything about the news. Paramount owns CBS, MTV, Comedy Central, and the streaming service Paramount+. Skydance and National Amusements did not answer right away when asked for comments.
But some analysts said that if the short courtship between Paramount and Skydance was really over, it wasn’t clear what would happen next for Paramount because the entertainment industry is dealing with huge losses on streaming platforms and huge changes in how people watch shows.
A research note from MoffettNathanson on Tuesday said, “Any plan, and any potential buyer of Paramount, will have to deal with a company whose mix of assets presents in many ways a challenged hand for navigating the shifting winds of media.”
After trading hours on Tuesday, Paramount’s stock was down 0.6%. It had been down 7.9% during the regular trading session.
Since the price fell during the regular trading session, it was one of the S&P 500 Index SPX stocks that fell the most. So far this year, Paramount stock is down 25.4%.
To try to make money for their streaming services and compete with Netflix Inc. NFLX, +0.63%, Paramount and other media companies have cut costs, let go of employees, and looked to join forces. Some analysts have already named Netflix the winner of the streaming wars that began more than a decade ago. Since the strikes last year, studios have cut back on making TV shows.
Sony SONY, -0.75% and Apollo Global Management Inc. APO, -1.73% both made offers on Paramount at the beginning of the month. But it was said that they were thinking again about that bid.
In the past few weeks, the Journal has also said that two other groups want to buy National Amusements, which runs movie theatres and owns 77% of Paramount’s voting shares. Edgar Bronfman Jr., a former media executive who would have the support of private equity firm Bain Capital, and Steven Paul, a Hollywood producer, were those people.
The Journal said that Skydance, the company that made some of Tom Cruise’s “Mission: Impossible” films, wanted to pay about $1.7 billion in cash to buy National Amusements. The Journal said that after that, Skydance and Paramount would have merged through a stock deal.
That same day, the Los Angeles Times said that Paramount’s independent directors were going to vote on the deal with Skydance. A report from the Times said that National Amusements told the directors it would not sign off because Skydance’s plans to give shareholders a chance to cash out with more money made National Amusements less valuable, which made Redstone sad.
Bob Bakish, who used to be the CEO of Paramount, was said to be against the deal with Skydance because he thought it didn’t give shareholders enough. Reports say that other board members were also against the deal.
The MoffettNathanson analysts said, “Ms. Redstone now seems set on either keeping things the same or selling off just her [National Amusements] stake, handing over the reins of her family’s empire to new stewards without getting involved in any bigger or more complicated plan that would involve other media companies or shareholders.”
“Paramount investors will have to look at the updated plan laid out at last week’s annual meeting if Ms. Redstone decides to look into only selling NAI further,” they said.
The analysts said that there weren’t many details available yet, but that the plan’s most important parts were the $500 million in extra cost cuts and the sales of assets to pay off debt. Along with licencing deals, they also looked into strategic partnerships and joint ventures for Paramount+.
But they said Paramount’s ability to make money still depended on TV networks that mainly showed family-friendly shows. They said that Paramount+ was still sitting on cash. They said that Paramount’s streaming service Pluto TV could hurt the company’s traditional TV ad sales, and the company’s movie division was also having trouble, despite some recent successes.
They said, “Paramount’s film studio has had a few decent hits in the past few years, but production and financing deals keep most of the money from these successes from going to the company.”
