Paramount Global executives revealed plans to cut costs and find a streaming service partner, but shares fell nearly 5% on Tuesday after hopes of a merger with Skydance Media faded.
Paramount controlling shareholder Shari Redstone regaled investors at the company’s annual meeting on Tuesday morning about an aggressive $500 million cost-cutting plan that her three CEOs say will “enhance value for all shareholders” and allow the company to invest in “best-in-class content.”
The CEOs said at the meeting that the moves would include focusing on finding a strategic partner for its loss-making streaming service Paramount+ and selling some assets, including potentially reselling BET Networks.
A leading Paramount analyst said the detailed presentation cast doubt on the feasibility of a deal with Skydance, whose revised merger proposal with Paramount was approved by the company’s special committee last week.
However, Redstone has not said whether he will accept the offer.
“The question is whether they are presenting a credible alternative to gain leverage in last-minute negotiations with Skydance or whether they are trying to walk away from the deal,” the analyst said.
“I think the three people who run Paramount want to go it alone.”
Representatives for Skydance, Redstone and the special committee for Paramount declined to comment.
The analyst added that Redstone appears to be “indecisive” judging by the strength of the presentation, and that the company has been trying to build Paramount+ to take on rivals such as Netflix and Disney but has wasted money building out its content library.
The annual meeting came amid reports that Redstone was unhappy with Skydance’s renewed merger agreement and was considering competing bids and alternatives.
Last week, Skydance CEO David Ellison, the son of billionaire Oracle founder Larry Ellison, reduced his original $2.5 billion takeover offer for National Amusements, which owns the Redstone family’s Paramount stake, and offered additional cash to the company’s non-voting shareholders. According to Reuters.
In his takeover proposal submitted last week, Ellison reduced the merger valuation of Skydance from $5 billion to $4.75 billion, freeing up more cash for shareholders, but Redstone was reportedly disappointed, according to Reuters.
As a result, Redstone is reportedly now considering an offer from Hollywood producer Stephen Paul, and sources say Redstone is mandated to consider all offers for National Amusements.
The trio that occupies the “Office of the CEO” — CBS President and CEO George Cheeks, Showtime/MTV Entertainment Studios President and CEO Chris McCarthy and Paramount Pictures President and CEO Brian Robbins — have led the company since previous president Bob Bakish stepped down in April amid growing tensions with Redstone.
Analysts said the company’s announcement that it would seek a strategic alliance or joint venture partner for Paramount+ signals that the media giant’s executives, including Redstone, are serious about a turnaround plan if it goes it alone.
The company’s direct-to-consumer business, which includes Paramount+, is expected to lose $1.3 billion in 2024, and finding a strategic partner could accelerate the company’s path to streaming monetization.
“Our plan is designed to restore Paramount to its best by increasing revenue while reducing costs, improving margins and returns,” Robbins told shareholders.
“Streaming is key for us as audiences shift from linear to streaming,” McCarthy emphasized, with Cheeks adding that Paramount is looking to “transform streaming,” increase profitability and “remove non-content costs,” aiming to save roughly $500 million annually. He said Paramount is “in discussions to sell some of its assets to unlock value,” which could include negotiating the sale of the BET network.
Like other media companies, Paramount has struggled financially with the decline of its traditional TV business as customers opt for streaming services over paying for cable, while its new streaming service, Paramount+, has yet to recover from lost revenue.
Paramount’s market capitalization has fallen by about $18 billion since December 2019, when Redstone reunited CBS and Viacom, the two halves of his family’s media empire.
Paramount entered exclusive merger talks with Skydance Media in April but allowed that exclusivity to lapse as it considered competing non-binding proposals from Sony Pictures Entertainment and Apollo Global Management.
The terms of Skydance’s latest proposal would see Paramount acquire the independent studio in a stock swap valued at $4.75 billion, according to reports.
Skydance and its deal partners, RedBird Capital and KKR, are offering to inject at least $1.5 billion in new capital into Paramount to pay down debt and buy 40 percent of Paramount’s non-voting Class B shares at $15 a share.
As a result, Skydance will acquire National Amusements, which owns cinemas in the U.S., U.K. and Latin America and owns 77% of Paramount’s Class A voting stock, and is controlled by the Redstone family.
The deal gives Ellison voting control over the major media companies, setting the stage for a merger.
Meanwhile, at Paramount Global, concerns about a possible merger are reaching a fever pitch at the media giant.
Paramount, which owns CBS, MTV, Paramount Pictures and Showtime, said Tuesday it was rescheduling a town hall meeting for employees scheduled for Wednesday to June 25, citing ongoing speculation about a potential deal.
“We want to be as open and transparent with you as possible,” the company’s co-chief executives told employees in a memo seen by Reuters. “By delaying the date, we hope to accomplish just that.”
With post wire
