'Immediately take this deal': Wall Street sees Byron Allen's Paramount bid as a savior

Paramount Global Posts Large Decline In Quarter Earnings

David McNew

To borrow a phrase from its hit movie The Godfather, Wall Street thinks Paramount (NASDAQ:PARA) (NASDAQ:PARAA) has an offer from Byron Allen it can’t refuse.

“We think PARA should immediately take this deal, as it represents [more than a] 50% premium to yesterday’s close, which is likely an acceptable premium for the majority of PARA’s shareholders,” KeyBanc Capital analyst Brandon Nispel said, adding a cash offer is “highly appealing.”

Paramount shares rose more than 8% on Wednesday.

Media mogul Allen has reportedly bid $28.58 for the voting shares of Paramount and $21.53 for the non-voting shares. Including debt, the total value of the deal is $30B.

However, Shari Redstone controls National Amusements, itself the controlling shareholder of Paramount, which could throw a monkey wrench into the deal, Nispel said. She has a history of “consistently believing the business is worth more than the market, or a willing third party, is willing to offer” and Paramount is likely to trade at a “large discount” to Allen’s offer as a result.

Others agreed with the sentiment that Paramount should take Allen’s deal, including Wells Fargo analyst Steve Cahall.

“We think Allen wants to keep PARA’s linear assets (e.g., CBS, cable nets, [Paramount+]), and would finance the deal by lining up a buyer(s) for Paramount Studios [and] LA real estate,” Cahall wrote. “These are assets that interested parties like Skydance likely want.” Skydance Media, run by CEO David Ellison is considering a bid for National Amusements.

Paramount has not publicly commented on Allen’s offer.

Others are not so sure that a deal will or could happen, due in part to financing.

“In the event of a change in control and/or senior notes falling below investment grade (2023: PARA BBB- /Baa3), [that] Paramount is obligated to make an offer to repurchase the debt at 101% of the aggregate principal amount debt is one of several reasons we see a very high financing hurdle in Allen’s path,” Wolfe Research analyst Peter Supino, who rates Paramount shares Underperform, said.

Allen is no stranger to media deals that have not worked out. Last year, he reportedly tried to acquire BET and VH1 from Paramount for approximately $3.5B. He also tried to acquire Disney’s (DIS) ABC networks for roughly $10B.

Roy Walsh

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