Paramount Global executives revealed a plan to cut costs and find a partner for its streaming service – but shares fell nearly 5% on Tuesday as hopes for a merger with Skydance Media dimmed .
Shari Redstone, Paramount’s majority shareholder, rallied investors Tuesday morning at the company’s annual meeting around an aggressive $500 million cost-cutting plan under the leadership of the trio of CEOs. company, which would “generate value for all of our shareholders” and allow the company to invest in “best-in-class content.”
The move would involve focusing on finding a strategic partner for its loss-making streaming service Paramount+, as well as divesting some assets, which could include putting BET Networks back on the block, the CEOs said during the meeting .
A top Paramount analyst said the detailed presentation cast doubt on the likelihood of a deal with Skydance, which submitted a revised offer to merge with Paramount that was approved by the company’s special committee last week .
Redstone, however, did not indicate whether she would accept the offer.
“The question is are they offering a credible alternative to get last minute leverage with Skydance or is it because they are pulling out of the deal?” said the analyst.
“I guess the three people who run Paramount want to go it alone.”
Representatives for Skydance, Redstone and Paramount’s special committee declined to comment.
The analyst added that Redstone appears to be “procrastinating” due to the strength of the presentation, adding that the company tried to create Paramount+ to compete with competitors like Netflix and Disney, but lost money to build. its content library.
The annual meeting came as Redstone was unhappy with the updated merger deal with Skydance and was considering competing offers and options.
Last week, Skydance CEO David Ellison, son of billionaire Oracle founder Larry Ellison, reduced his initial $2.5 billion offer for National Amusements, which owns the Redstone family’s Paramount stake, in order to providing additional liquidity to the company’s non-voting shareholders, according to Reuters.
In a subsequent offer submitted last week, Ellison created more liquidity for shareholders by reducing Skydance’s valuation of the merger from $5 billion to $4.75 billion, much to Redstone’s dismay, Reuters reported.
As a result, Redstone is now reportedly considering an offer from Hollywood producer Steven Paul. Sources said Redstone was obligated to consider all offers for National Amusements.
The troika occupying the “CEO’s Office”: CBS Chairman and CEO George Cheeks; Chris McCarthy, president and CEO of Showtime/MTV Entertainment Studios; and Paramount Pictures Chairman and CEO Brian Robbins have led the company since the departure of former boss Bob Bakish in April, who left amid growing tensions with Redstone.
The analyst noted that the company’s announcement that it would seek a strategic partnership or joint venture partner for Paramount+ indicated that the media giant’s top executives – including Redstone – were taking the turnaround plan seriously. they wanted to go it alone.
Its direct-to-consumer business, which includes Paramount+, is expected to lose $1.3 billion in 2024, and the search for a strategic partner could accelerate the company’s path to continued profitability.
“Our plan aims to rebuild the best of Paramount by generating higher revenues with lower costs, which translates into higher profits and better returns,” Robbins told shareholders.
McCarthy emphasized that “streaming is key to the business as audiences migrate from linear to streaming, while Cheeks added that Paramount would “transform streaming” to move closer to profitability, “reduce non-content costs” , looking at approximately $500 million in annual cost reductions. He said Paramount was “in discussions to divest some of our assets to unlock value,” which could include negotiations to sell BET Networks.
Like other media companies, Paramount has struggled financially as the traditional television business has declined due to customers choosing to stream content rather than pay for cable. Meanwhile, the streaming service he launched, Paramount+, has yet to recover lost revenue.
Paramount has lost about $18 billion in market value since December 2019, when Redstone brought together the two halves of the family’s media empire, CBS and Viacom.
In April, Paramount entered into exclusive merger negotiations with Skydance Media, but let that period of exclusivity expire while evaluating a rival non-binding offer letter from Sony Pictures Entertainment and Apollo Global Management.
Under the terms of Skydance’s latest offer, Paramount would acquire the independent studio in an all-stock deal valued at $4.75 billion.
Skydance and its business partners, RedBird Capital and KKR, would inject Paramount with at least $1.5 billion in new capital to use to pay down debt, and would offer to buy 40% of Paramount’s non-voting Class B shares. at $15 per share.
As a result, Skydance would acquire National Amusements, which owns movie theaters in the US, UK and Latin America, and owns 77% of Paramount’s Class A voting stock, representing the company’s majority stake. Redstone family in the company.
The deal would give Ellison voting control over the largest media company, paving the way for the merger.
Meanwhile, at Paramount Global, concerns about a possible merger have reached a fever pitch at the media giant.
On Tuesday, Paramount – which owns CBS, MTV, Paramount Pictures and Showtime – announced that it had postponed a public employee meeting scheduled for Wednesday until June 25, citing ongoing speculation about a potential deal.
“We want to be able to speak to you as candidly and transparently as possible,” the company’s co-CEOs told employees in a memo seen by Reuters. “By pushing back the date, that’s exactly what we hope to do.”
With post wires