Why Shari Redstone needs the right deal
Shari Redstone, president of National Amusements, speaks at the WSJ Tech Live conference in Laguna Beach, California, on October 21, 2019.
Mike Blake | Reuters
Paramount Global’s flagship streaming service, Paramount+, has amassed 63 million subscribers and continues to grow. But it’s also still losing money, although not as much as before. Streaming operating losses in the third quarter were $238 million. A year ago, it was worth $343 million.
Without a clear growth narrative, Paramount Global struggled as a publicly traded company. Shares are down 56% in the past two years. This has sparked interest from some private equity firms and other potential buyers, including Skydance Media’s David Ellison and media mogul Byron Allen.
If Paramount Global — which owns Paramount Pictures, CBS, cable networks like Nickelodeon and Comedy Central, and intellectual properties like “Star Trek” and “SpongeBob SquarePants” — were to dissolve as a publicly traded company, it might go private or sell Some of it. From assets to more logical parts.
Redstone has personal reasons to consider selling now, too. She has long had an active interest in Jewish issues, including her work on the Board of Directors of Inter-Jewish Charities.
Redstone’s focus on combating anti-Semitism has increased since the October 7 Hamas terror attack on Israel, which killed about 1,200 people, according to people familiar with Redstone’s thinking.
“Look, I’m not feeling well, to be honest,” Redstone told The Hollywood Reporter in October. “I think there are no words to describe what happened, and all I do every day is try to do something that will make a difference and help people.”
National Amusements President Shari Redstone arrives at Allen and Co.’s annual media conference. Sun Valley in Sun Valley, Idaho, on July 5, 2022.
Brendan McDiarmid | Reuters
Then there’s a big financial consideration involving National Amusements Inc., or NAI, the holding company that owns a majority of Paramount Global’s voting shares.
When Redstone’s father, Sumner Redstone, founder of National Amusements, died in 2020, Shari Redstone inherited his shares. National Amusements owns, directly or indirectly through subsidiaries, 77% of the Class A voting stock of Paramount Global and 5.2% of the Class B common stock, constituting approximately 10% of the Company’s total shares.
According to tax law, Shari Redstone must pay taxes on the stocks tied to their value at the time of her father’s death. That amounts to more than $200 million, according to a person familiar with the matter.
Redstone deferred its tax bill for 10 years, until 2034, and only owes about $7 million this year, said the person, who asked to remain anonymous because the details are private. However, the looming tax payment, coupled with an additional $37 million debt repayment owed to Wells Fargo in March, could be a compelling motivation to sell National Amusements for cash, rather than a stock trade with a strategic partner.
National Amusements will make its March payment on time, according to a Redstone spokesperson.
“National Amusements has significant assets, including well-located cinemas in the US, UK and Latin America, and real estate properties owned and contributed by Paramount Global. We continue to take steps to improve our financial position including by reducing debt through repayment A large sum, a ministry spokesman said in March.
Redstone’s diverse motivations for selling mean it’s looking for the right kind of deal, at the right price — and so far, it’s had options.
Warner Bros. Discovery is in preliminary talks to acquire Paramount Global. While John Malone, a member of the board of directors of Warner Bros., suggested… Discovery, in an interview with CNBC in November, said Paramount Global could be a distressed asset in the future, but that fate could be avoided if CEO Bob Bakish can make Paramount+ profitable.
There could be structural issues with the Warner Bros. deal. Discovery, in connection with the cash stock split, including the amount of debt the combined company is willing to assume. It’s also possible that Warner Bros. could pick up the film. Discovery is waiting to see if Comcast is ready to part ways with NBCUniversal.
In early talks with buyers, Redstone pushed for a high premium for both National Amusements and Paramount Global, according to people familiar with the matter. Paramount Global has a market capitalization of approximately US$10 billion and approximately US$13 billion of net debt.
Redstone also has fiduciary duties as non-executive chairman of Paramount Global. If you agree to sell National Amusements or all of Paramount Global, you will need to buy in from other investors.
Banker Byron Trott, who is helping Redstone navigate sale talks, has long been an adviser to Warren Buffett, whose Berkshire Hathaway is Paramount Global’s Class B shareholder.
People familiar with the process said no agreement was imminent. As CNBC reported last month, Skydance is interested in acquiring NAI as part of a two-step deal that includes merging Skydance with Paramount Pictures.
Talks are more underway with Redstone about NAI than with Paramount Global, two of the people said. However, Skydance is only interested in acquiring NAI if it can close a deal with Paramount Global, CNBC reported in January.
Spokespeople for Skydance, National Amusements and Paramount Global declined to comment.
There’s also the matter of the looming carriage deal between Charter and Paramount Global, which is set to expire in April, according to people familiar with the matter. This may not be the reason for Redstone’s urgency to sell, as a potential deal would be reached long before the acquisition closes, but it certainly looms large over the company’s future prospects.
While Comcast, the largest cable provider in the United States, and Paramount Global renewed their deal without much fanfare last December, Charter was different. The second-largest U.S. cable operator struck a deal with Disney last year that cleared the way for Charter to begin cutting its little-watched cable networks while selling subscription streaming services to millions of broadband customers.
Paramount Global charges $5.99 per month for Paramount+ with ads. Most of what airs on the CBS and Paramount Global cable networks is available on Paramount+. This gives the charter two advantages in the renewal deal.
First, Charter will likely argue that Paramount Global has set a price of $5.99 for the value of all its cable and CBS networks. Charter can refer to this as the maximum price it is willing to pay for Paramount Global’s linear channels.
Second, Charter now has some blackout leverage over consumers because it can steer them toward Paramount+ as a relatively inexpensive way to access Paramount content. Charter will make the same argument it made with Disney: Having the same content on both the streaming service and linear channels charges the consumer twice as much.
Bob Bakish, CEO of Paramount, speaks with CNBC’s David Faber on September 6, 2023.
Paramount Global probably can’t afford to lose carriage for the bulk of its networks with Charter, given Paramount+ continues to lose money. Paramount Global is still relying on its linear business, which generated $15 billion of its $22 billion in revenue in the first nine months of 2023 from traditional TV. More than $6 billion of that came from cable affiliate fees.
Bakish has consistently been successful in reaching renewal deals with major pay-TV distributors since taking over as CEO in 2019 and dating back to his time running Viacom, starting in 2016. However, given Bakish’s lack of clout, he may have to accept With a lower affiliate fee or agreement that reduces the value of Paramount+.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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(tags for translation) Business