Story Stocks^®

In the lengthy saga over the future of Paramount Global (PARA +8%), there may finally be some certainty on the horizon following a WSJ article reporting that Skydance Media, owned by the cofounder of Oracle's (ORCL) son, is looking to shell out $1.75 bln for National Amusements to merge Skydance into Paramount. The deal is multi-faceted, but National Amusements is critical as it owns around three-quarters of PARA's voting shares.

The news comes as a bit of a surprise given that last month, reports broke that National Amusements failed to reach an agreement with Skydance over its $23/share offer. At the same time, the non-executive Chairperson of PARA, Shari Redstone, was reportedly unlikely willing to merge PARA into another company.

There have been plenty of suiters willing to strike a deal with PARA, including Apollo Global Management (APO), which offered $11.0 bln for the company's film and TV studio, and Sony (SONY), which was still lingering in the backdrop to ink a deal with National Amusements. Also, yesterday, The New York Times reported that Barry Diller was mulling a bid to take control of PARA. Today's report does not take all other possible buyers off the table, especially given how flimsy these reports have proved to be in the past. However, it is more likely that a deal could finally be reached, particularly given PARA's deteriorating financial position.

• PARA has been increasing its efforts to bring heightened awareness to its streaming platform Paramount+, bundling it with other subscription services such as Walmart+ (WMT). However, with the streaming market flooded with options, it has been challenging to stand out while keeping the attention on profitability. PARA's DTC revenue, which includes streaming, was the silver lining to a tepid Q1 report, registering a 24% bump in revs yr/yr. However, the losses continued to mount, albeit at a slowing rate, with adjusted operating income before depreciation and amortization of $(286) mln in Q1.
  • While a merger would not immediately lift Paramount+ into the green, it could precede the divestiture of PARA's linear assets (traditional cable and network TV stations), allowing it to focus solely on bolstering its streaming service.
• PARA currently has no single CEO; it established an Office of the CEO, consisting of three executives, following former CEO Bob Bakish's abrupt departure in late April. The strategy of the newly formed Office of the CEO centers on PARA's streaming service and balance sheet. Since then, it has become increasingly likely that PARA will need to find a buyer. Its debt load has swelled while sales have stagnated. A possible Skydance deal could bring some debt relief through significant cash injection. Its prior deal that broke down included $1.5 bln to fortify PARA's balance sheet.

The main takeaway is that the story about PARA's near-term future may have found an ending as it becomes more likely that Skydance and National Amusements will seal a deal. However, PARA still faces many obstacles even if a merger agreement can be reached.