Paramount Global’s Options: Apollo-Sony Or Skydance? Office Of The CEO Might Win Out-Trio offered cost-cutting plan by maybe selling Paramount lot & lease it back, BET & Pluto TV, and slash headcount with board’s positive reception. (Insiders say saga of company won’t be resolved in the short term.)
by lowell2017
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“What the hell is going on with Paramount? After letting a 30-day negotiating window with Skydance Media lapse on Friday, the board’s special committee decided over the weekend to formally consider a $26 billion, all-cash offer for the company from Sony Pictures Entertainment and the private equity firm Apollo Global Management.
The committee will continue to explore the initial deal proposed by Skydance founder David Ellison. But they will also consider the Sony-Apollo joint deal, according to two individuals TheWrap spoke with on Sunday.
It sounds like we are back to square one.
There is, however, another option. The newly-named “Office of the CEO” — composed of the three top executives Brian Robbins, George Cheeks and Chris McCarthy — who replaced ousted CEO Bob Bakish last week, are in the drivers seat right now.
They are a viable go-forward option for Paramount, and they have a plan.
According to four individuals who spoke to TheWrap, the executives met with the Paramount board last week and offered a detailed plan to address the most pressing problems and turn the listing company around over the next three years.
The plan boils down to reducing Paramount’s $14.6 billion debt through aggressive cost-cutting and raising cash by selling assets which would likely include, among other things:
– The Paramount lot for an estimated $2 billion, and then leasing it back for the studio’s use.
– BET and VH1 networks, estimated value $3 billion
– Pluto TV, which is run by Tom Ryan
The internal plan would also involve aggressively reducing head count. And the CEO triumvirate is looking at strategic options for streaming, which could include the sale of Pluto or “potential alternatives” for Paramount+ as one insider put it, with the goal of getting to profitability by the end of 2025.
As everyone knows by now, Paramount Global — the owner of Nickelodeon, MTV, CBS and Paramount Pictures — has been seeking a way out of its current predicament. The company is enduring persistent declines in its stock price in the face of secular, downward pressure on broadcast and cable businesses and a still-unprofitable streaming business in Paramount+.
The aim of the plan would be to relieve the crushing debt burden and get Paramount’s global debt upgraded from its current junk status, which continues to weigh down the stock price. Credit rating agency S&P Global recently downgraded Paramount’s debt to junk, one level below investment grade, based on “weak credit metrics.”
The other priority in the plan would be to restore payment of a dividend, which has endlessly aggravated Shari Redstone, the non-executive chairwoman of Paramount Global, president of National Amusements and the controlling shareholder of the studio. Bakish cut the divided by 75% in 2023 as a way of maintaining cash with the hope of driving up the stock.
That hasn’t happened. The stock is down about 25% from a year ago. Without the normal dividend, Redstone feels backed into a corner.
A spokesperson for Paramount declined to comment on the meeting, the plan or the dividend.”
Thoughts so far on this:
Yeah, this feels like a Skydance-lite scenario even without the Ellisons, private-equity firms Saudi-backed Redbird Capital & KKR, and Tencent at the helm.
The Redstones definitely pulled the move of removing Bakish from the equation a little too early here. Some have said it might be foolish to do so since nothing was guaranteed at all.
If this trio doesn’t do well at all, the shareholders might probably demand that Bakish returns as CEO since he’s still hanging on as an advisor until the end of October.
But this status quo (especially if no deal at all is a possible outcome) looks kind of weird over there without a steady hand like Bakish leading it, given the recent earnings showed he’s been doing a lot of progress on making sure Paramount+ gets through the break-even point and reaching profitability.
At that point you might aswel sell the whole company.
Selling Pluto would be a boneheaded move