While some have scoffed at Byron Allen’s latest billion-dollar bid, this time targeting Paramount Global, Wells Fargo analyst Steven Cahall called the offer “credible” and said the Allen Media Group chief’s offer increases the odds that Paramount does a deal with someone.
Paramount Class B shares jumped 15% in early trading Wednesday and were up about 7% at midday.
Allen confirmed that he offered $30 billion in debt and equity for both Paramount’s controlling shares and its publicly held shares.
“Investors have viewed Allen's prior media M&A offers as longer shots due to financing. However, those deals didn't always have willing sellers (Disney’s ABC, Paramount’s BET),” Cahall said in a note on Wednesday morning.
Cahall said there were reasons why Allen’s bid for Paramount seems “credible” to him.
“This is the first offer that benefits B shareholders vs. just a premium for NAI's A shares that convey control,” Cahall reasoned. “This could put pressure on the board to explore options that benefit everyone, and it could mean that currently reported interested parties (e.g., Skydance, Redbird, Apollo) have to consider a total share offer, too.”
Also Read: Paramount Global Stock Jumps on Report of Possible Buyout
Cahall looked at the math of Allen’s plan, which appears to be to sell off the Paramount studio, some intellectual property and real estate, while keeping CBS, Paramount’s cable networks and the Paramount Plus streaming service.
Most of the others interested in Paramount want the studio and would have to search for a buyer for its declining linear assets. Allen wants those, making a purchase and breakup easier to execute because “there are ample buyers for the studio/content,” the analyst said.
Cahall figures that Paramount Pictures is worth $13 billion plus $2 billion for its studio lot. That means Allen values the linear assets and Paramount Plus at $15 billion.
Robert Fishman of MoffettNathanson was more skeptical about Allen’s offer.
“As of right now, the financing behind his bid is unclear, casting a shadow on the offer’s credibility. Without financing details, we are not sure what the impact will be on the ongoing processes others are pursuing for Paramount and National Amusements’ controlling stake,” Fishman said.
Fishman notes that by assuming Paramount’s debt, he risk triggering change-of-control covenants.
As to Allen’s interest in running Paramount’s network and running them better, Fishman says “we wish him the best of luck.”
It’s not just Allen. Legacy media is a mess.
“The situation in U.S. media has increasingly progressed from challenged to desperate, leaving management teams to consider commensurately desperate measures. That clearly now includes accelerated M&A talks.” Fishman said.
