Why Is Paramount Global Stock Surging In Monday's Premarket Session?

Paramount Global PARA shares are trading higher after the company inked a definitive merger deal with Skydance Media to form “New Paramount” at an enterprise value of about $28 billion.

The merger offer represents a 48% premium over the price of the Class B stock as of July 1, 2024, and a 28% premium over the Class A stock on the same date.

As per the deal, existing Skydance investors will receive 317 million newly issued Class B shares in New Paramount, valuing Skydance at $4.75 billion, based on a share price of $15 for Paramount Class B shares.

The Skydance Investor Group, led by the Ellison Family and RedBird Capital Partners, plans to invest $2.4 billion in cash to acquire National Amusements, along with $4.5 billion for stock/cash merger consideration for Class A and Class B shares, and add $1.5 billion in primary capital to Paramount’s balance sheet.

The transaction is expected to be completed in the first half of 2025.

After the transaction closes, the Skydance Investor Group will own 100% of New Paramount’s Class A shares and approximately 69% of the outstanding Class B shares, representing around 70% of the pro forma shares outstanding.

Notably, the merger between Skydance Media and Paramount Global has been in the works for some time. 

Related: Paramount And Skydance Merger Talks Fall Through: Report

On January 2, 2024, Paramount’s Board formed a Special Committee of independent directors to review the proposals, and the committee unanimously recommended the Skydance transaction for Board approval.

Following the transaction, David Ellison will lead as Chairman and CEO of New Paramount, while Jeff Shell, Chairman of RedBird Sports & Media and former NBCUniversal CEO, will join as President.

The transaction is expected to bolster Paramount’s financial flexibility, enabling investments in new initiatives and accelerating efforts to innovate its operational model, upgrade technology platforms, streamline the organization, and drive enhanced cash flow growth.

As of March 31, 2024, Paramount’s cash and cash equivalents stood at $2.38 billion.

PARA stock lost over 20% in the last 12 months. Investors can gain exposure to the stock via the Invesco S&P 500 Equal Weight Communication Services ETF RSPC and the Invesco Leisure And Entertainment ETF PEJ.

Price Action: PARA shares are up 2.96% at $12.16 premarket at the last check on Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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