Media company Paramount Global PARA agreed to a merger with Skydance Media to form "New Paramount," valuing the combined company at $28 billion.
Here's a look at what analysts are saying and how Paramount Non-Executive Chairwoman Shari Redstone sees the deal playing out.
What Happened: After months of negotiation, Paramount and Skydance have come to a merger agreement to combined the media entities.
The merger agreement comes with a 48% premium for Paramount Class B stock and a 28% premium over the Paramount Class A stock price based on a date of July 1, 2024. Class A shareholders will receive $23 per share and Class B shareholders will receive $15 per share or one share in the new company.
Skydance investors will receive 317 million newly issued shares in New Paramount, which values Skydance at $4.75 billion.
The Ellison Family and RedBird Capital Partners, who lead the Skydance Investor Group, are investing $2.4 billion in cash to acquire National Amusements, $4.5 billion for stock and cash consideration for Paramount Class A and Class B shares and $1.5 billion to add to Paramount's balance sheet.
The merger is expected to be completed in the first half of 2025.
Read Also: Why Is Paramount Global Stock Surging In Monday’s Premarket Session?
What Analysts Are Saying: A revised merger between Skydance and Paramount since negotiations began is viewed as a "better sequel" by Rosenblatt analyst Barton Crockett.
The analyst, who upgraded shares from Sell to Buy in March, said the new leadership comes with high hopes, strong sector expertise and "bountiful capital."
"It's not clear yet if the ending will be fully satisfying, giving meaningful secular pressures," Crockett said.
Crockett, who has a $14 price target, said the deal is likely to proceed with National Amusements approving the merger. The deal will need regulatory approval, which Crockett does not see as problematic.
"The main question is a 45-day go shop period."
Crockett said Barry Diller, Apollo Global APO, Sony Group Corp SONY, Edgar Bronfman Jr., Warner Bros. Discovery WBD and Byron Allen are all interested parties in acquiring Paramount.
"We don't see any of these parties really able or interested in outbidding the Ellison/Redbird group backing Skydance."
After the merger, Skydance is expected to own 70% of the equity and all of the voting A shares, with the public owning 30% of the equity with non-voting B shares.
Crockett said the merger is "not a breakup."
"Skydance seems to be playing for boosting earnings at Paramount, not a breakup. That will be tricky, given the secular pressures in TV and movies and competition in streaming."
Crockett highlighted the Skydance group bringing in media executives with management talent (Jeff Shell, Jeff Zucker).
LightShed Partners analyst Rich Greenfield said the "most telling paragraph" from the merger agreement is one that mentions the 100-year-old legacy of the media company.
"It also preserves American jobs, fosters continued innovation and secures a prosperous future for the creative community at Paramount, while protecting the legacy that viewers across the globe know and love," the merger agreement said.
Greenfield said all signs point to a "dramatic investment" in Paramount+ from the merger, that could help the streaming platform compete globally.
The Paramount Future: Controlling Paramount shareholder Redstone issued a letter to Paramount employees to share excitement for the future, as shared by Deadline.
"Our success is because of you, what you have done individually, and even more importantly, as a team," Redstone told employees.
Redstone told employees that her father Sumner Redstone brought together a group of best assets in media, news and entertainment to form the existing media company today.
"While people often debated whether content or distribution ruled the day, my father was governed in all of his decision by his belief that content was indeed king."
The controlling shareholder said this remains more important today with a "cluttered marketplace."
Redstone praised the Paramount+ streaming platform as one of the fastest-growing streaming services in the marketplace and CBS being the number one broadcast network for 16 years.
"It has been our responsibility to work with leadership to make changes in order to maintain our competitive position and fuel growth, thinking of both the near and longer term."
Redstone said the Skydance investor group has a "clear strategic vision for the future" and resources to continue building Paramount's competitive advantages.
The letter comes with uncertainty for employees with the company likely to see new executives bring cost cuts plan and a focus on key growth items.
PARA Price Action: Paramount shares are down 1% on Monday to $11.67 after trading higher in pre-market trading. Paramount stock is down 20% year-to-date in 2024.
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