Paramount's stock falls and bonds rally as company seals buyout deal with Skydance Media

By Ciara Linnane

'It's the old "buy the rumor, sell the news" adage,' says a market source

Paramount Global's stock was selling off on Monday while its bonds were rallying, after the company moved closer to finalizing Skydance Media's buyout of the entertainment giant.

A special committee of Paramount's board members voted in favor of a merger with Skydance, the studio run by David Ellison, son of Oracle Corp.'s (ORCL) co-founder Larry Ellison.

As expected after months of talks, Skydance would buy National Amusements, Shari Redstone's company that controls Paramount. Then, Skydance and Paramount would merge.

"In 1987, my father, Sumner Redstone, acquired Viacom and began assembling and growing the businesses today known as Paramount Global. He had a vision that 'content was king' and was always committed to delivering great content for all audiences around the world," said Redstone in a statement. "Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king."

Under the terms of the deal, Paramount shareholders will receive either $15 a share in cash or one share of the new entity, equal to a 48% premium over the July 1 price, before the deal talks started.

Paramount (PARA) is home to CBS, cable networks including MTV and Comedy Central, the namesake movie studio, and the Paramount+ streaming service.

Skydance is an independent production company run by the younger Ellison. It has previously partnered with Paramount on a number of movies, including "Top Gun: Maverick" and "Mission: Impossible - Dead Reckoning."

The stock was down about 3% and remains down 22% to date in 2024, underperforming the S&P 500 SPX, which has gained about 17%.

Spreads on the company's outstanding bonds, meanwhile, tightened by as much as 15 basis points on some longer bonds such as the 4.376% bonds that mature in March of 2043, as the following chart from data solutions provider BondCliQ Media Services shows.

The price of the same bond rose about five points on the week.

The bonds saw net buying over the past week before sellers emerged on Monday to sell into the rally. "It's the old "buy the rumor, sell the news" adage," said one market source.

Rumors of a deal for Paramount have been percolating for months. Skydance was apparently close to sealing a deal in June, but talks broke off at the last minute, only to be revived weeks later.

Paramount and other media companies have cut costs, laid off staff and sought to combine as they try to find a path to profitability for their streaming services and compete with Netflix Inc. (NFLX), which some analysts have already crowned the winner of the streaming wars that began more than a decade ago. Studios have pulled back on TV production in the wake of last year's strikes.

Other bidders that emerged during the talks included Sony (SONY) and private-equity firm Apollo Global Management Inc. (APO); Barry Diller and his media company IAC Inc. (IAC); former media executive Edgar Bronfman Jr., who would have the backing of private-equity firm Bain Capital; and Hollywood producer Steven Paul.

-Ciara Linnane

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07-08-24 1151ET

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