Paramount Global shares drop after annual meeting as hopes of merger with Skydance fade

Paramount Global executives revealed a plan to slash costs and find a partner for its streaming service — but shares fell nearly 5% Tuesday as hopes of a merger with Skydance Media dimmed.

Shari Redstone, Paramount’s controlling shareholder, rallied investors Tuesday morning at the company’s annual meeting around an aggressive $500 million cost-cutting plan under the firm’s trio of CEOs that would “drive value for all our shareholders” and allow the company to invest in “best-in-class content.”

The move would include focusing on finding a strategic partner for its money-losing streaming service Paramount+, as well as divesting some assets, which could include putting BET Networks back on the block, the CEOs said at the meeting.

A leading Paramount analyst said the detailed presentation cast doubts on the likelihood of a deal with Skydance, which submitted a revised bid to merge with Paramount that was approved by the company’s special committee last week.

Redstone, however, hasn’t indicated whether she would accept the offer.

“The question is are they putting out a credible alternative to gain last-minute leverage with Skydance or is it because they are pulling out of the deal?” the analyst said.

“I’m going to guess the three people running Paramount want to go it alone.”

Reps for Skydance, Redstone and Paramount’s special committee declined to comment.

The analyst added that Redstone appears to be “waffling” based on the strength of the presentation, adding that the company had been trying to build up Paramount+ to compete with rivals like Netflix and Disney, but that it has been bleeding cash in order to build up its content library.

The annual meeting took place amid reports that Redstone is unhappy with the updated merger deal from Skydance and is considering rival bids 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 holds the Redstone family’s Paramount stake, to provide additional cash for the company’s nonvoting shareholders, according to Reuters.

In a later bid submitted last week, Ellison created more cash for shareholders by reducing Skydance’s valuation of the merger to $4.75 billion from $5 billion, to the dismay of Redstone, Reuters reported.

As a result, Redstone is now reportedly considering an offer from Hollywood producer Steven Paul. Sources said Redstone is obliged to consider all offers for National Amusements.

The troika occupying the “Office of CEO” — CBS President and CEO George Cheeks; Chris McCarthy, president and CEO of Showtime/MTV Entertainment Studios; and Paramount Pictures President and CEO Brian Robbins — have led the company since the exit of former boss Bob Bakish in April, who left amid growing tensions with Redstone.

The analyst noted that the fact that the company announced it would look for a strategic partnership or a joint-venture partner for Paramount+ indicated that the media giant’s top brass — including Redstone — is serious about the turnaround plan if they are to go it alone.

Its direct-to-consumer business, which includes Paramount+, is expected to lose $1.3 billion in 2024, and that finding a strategic partner could accelerate the company’s path to streaming profitability.

“Our plan looks forward to build back the best of Paramount by delivering higher revenue with lower costs, which translates to higher earnings and better returns,” Robbins told shareholders. 

McCarthy emphasized that “streaming is key to the company as audiences migrate from linear to streaming, while Cheeks added that Paramount would be “transforming streaming,” to get closer to profitability, “reduce non-content costs,” by eyeing around $500 million in annual cost cutting. He said that Paramount was “in talks 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 opting to stream content rather than pay for cable. Meanwhile, the streaming service it launched, Paramount+, has yet to recover lost revenue. 

Paramount has shed about $18 billion in market value since December 2019, when Redstone reunited two halves of the family’s media empire, CBS and Viacom.

In April, Paramount entered into exclusive merger talks with Skydance Media, but allowed that period of exclusivity to lapse as it evaluated a rival nonbinding offer letter from Sony Pictures Entertainment and Apollo Global Management.

Under the terms of the latest offer from Skydance, Paramount would acquire the independent studio in an all-stock transaction valued at $4.75 billion, according to reports.

Skydance and its deal partners, RedBird Capital and KKR, would infuse Paramount with at least $1.5 billion in fresh capital to be used to pay down debt, and offer to purchase 40% of Paramount’s nonvoting class B stock at $15 a share.

As a result, Skydance would acquire National Amusements, which owns movie theaters in the US, the UK and Latin America, and holds 77% of Paramount’s class A voting stock, representing the Redstone family’s controlling interest in the company.

The deal would give Ellison voting control over the larger media company, setting the stage for the merger.

Meanwhile back at Paramount Global, concerns over a potential merger have hit a fever pitch at the media giant.

On Tuesday, Paramount– which owns CBS, MTV, Paramount Pictures and Showtime — said it rescheduled Wednesday’s planned employee town hall for June 25, citing ongoing speculation about a potential deal.

“We want to be able to speak to you with as much candor and transparency as possible,” the company’s co-CEOs told employees in a note seen by Reuters. “By moving the date, our hope is to do just that.”

With Post wires