Paramount Global (NASDAQ:PARA) said it finally reached an agreement to be acquired by privately held Skydance Media. The sides had been negotiating for months.
The most important part of the deal is a 45-day “go shop” period. This period allows the Paramount board time to find a better bid.
The deal is complex, and PARA stock rose only about 2% on the news. It was due to open this morning at $12 per share; its market capitalization is just $8.2 billion.
Big Tech Triumphs
The deal puts Paramount firmly in the orbit of “Big Tech,” alongside Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), which owns YouTube. That’s because Skydance CEO David Ellison is the son of Oracle (NASDAQ:ORCL) CEO Larry Ellison. The elder Ellison is the world’s fifth richest person and has an estimated fortune of $179.3 billion, according to Forbes.
Under the deal, Skydance and its Redbird Capital partners will buy National Amusements for $1.75 billion. National Amusements controlled Paramount with 77% of the voting stock. Paramount will then get a cash injection of $1.5 billion, and about half of Paramount’s non-voting shares will be bought for $15 each. Non-voting shares will be bought at $23 each.
Once the deal is done, David Ellison will join the Paramount board alongside Jeff Shell, a former CEO at Comcast’s (NASDAQ:CMCSA) NBC Universal. Shell will become President of Paramount with Ellison as CEO.
In a statement, National Amusements’ Shari Redstone, whose late father Sumner Redstone built the company, said “content will remain king” at the company. Paramount Global owns CBS Television and the Viacom cable networks, as well as the Paramount movie studio.
The deal still faces regulatory hurdles. The Federal Communications Commission (FCC) must approve the sale of CBS. Skydance said the deal has a total enterprise value of $28 billion, including Skydance’s valuation of $4.75 billion and Paramount’s debt. The two sides hope to close the deal early next year.
PARA Stock: What Happens Next?
Ellison’s fortune gives Paramount the ability to compete again with the Cloud Czars for sports rights and other media assets. Attention will now turn to the weakest of the remaining big media companies: Warner Brothers Discovery (NASDAQ:WBD).
As of this writing, Dana Blankenhorn had a LONG position in AMZN and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
