Story Stocks^®

Paramount Global (PARA -5%) turns lower after ending its "Go-Shop" period, which was extended last week after Edgar Bronfman Jr. and several other investors tossed out a bid to purchase the company. Paramount has been seeking acquirers for some time now, recently signing a definitive agreement with Skydance, which is buying National Amusements, the entity that owns most of the Class A voting shares.

However, Mr. Bronfman, the former Chairman and CEO of Warner Music and current Chairman of Fubo (FUBO), made a competing offer, initially outlining a $4.3 bln proposal, which he raised to $6.0 bln, only to withdraw this bid last night. The withdrawal reportedly followed some of Mr. Bronfman's partners dropping out, keeping him from piecing together the equity to finance the acquisition.

Skydance's and Mr. Bronfman's offers are similar. For example, each will pour $1.5 bln of cash into Paramount and purchase the company through National Amusements. However, there are a few key differences explaining why shares of Paramount slipping today.

• Skydance is offering Paramount Class B shareholders the option to either sell around half of their holdings for $15.00 per share, representing a premium of around 40% when using today's stock price, or hold onto them while the companies merge.
• While the details of Mr. Bronfman's offer are murky, his takeover deal does not appear to involve shareholders being able to offload half their Class B shares at $15.00 per share. Instead, reports show that it offered shareholders the ability to cash a significantly smaller percentage of their holdings at $16.00 per share.
• While Mr. Bronfman's proposal did allow Class B shareholders to sell at a slightly higher price, they would not have been able to sell as much. In the ongoing M&A saga Paramount has been involved in for months, cutting ties with Mr. Bronfman is not the worst-case outcome. The Skydance deal provides Paramount with a much-needed cash injection while also adding a new leadership team that could re-energize the company.

The main takeaway is that today's sell-the-news reaction to Mr. Bronfman pulling out of the battle to acquire Paramount may be overblown. Still, even though the uncertainty surrounding who will take over Paramount has cleared, the company has a formidable uphill climb. Cable is struggling, and streaming comes with significant operating costs. Paramount has plenty on its plate under new leadership, which is expected to step in sometime during 1H25 when the Skydance transaction closes.